Customer Reviews

The Continental affair: The rise and fall of the Continental Illinois Bank

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4 star:		(1)
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1 star:		(0)

 

 

The author does a good job in pinpointing the speculative nature of the loan policies of Continental Illinois(energy loans),the acceptance by Continental Illinois of over 1 billion in risky loans from Penn Square Bank,and its reliance on huge amounts of short term deposits from Japanese banks to fund long term loan commitments.The failures of deregulation were visible with the collapse of these two major banks-Penn Square bank in 1982 and Continental Illinois in 1984.Unfortunately,the failure to control the inherent banker desire to speculate was not dealt with,although Bill Casey kept the Giant Wall Street investment Banks in line as long as he was at the helm of the Securities and Exchange Commission(SEC).

I deducted a 1/2 star because the author of the book is apparently unaware that such banker behavior is the norm. Adam Smith demonstrated the dangers of allowing bankers to either make loans to speculators and/or engage in speculation(bankers call this securitization)themselves in The Wealth of Nations in 1776(See pp.339-340;Modern Library edition).