Who holds S&L Mortgages?

[HECHT@xxxxxxxxxxxxx]

Here's a question about S&L Balance Sheets:

I was lecturing the other night to my adult-ed class at Baruch and
was trying to talk about "disintermediation" and how all the nice
homely local S&L's got stuck with 5% mortgages when interest rates
skyed to 16% in the early 1980's.  Now one of my student's insisted
that in today's "financially innovative" environment S&L's would
never get burned again because they can get rid of the
inherent interest rate risk of home mortgages through "swap" and other
hedging strategies.  I responded that though they can diversify some
of the risk, the asset base of the local S&L is still comprised mainly
of home mortg's.  Moreover, New York State banking laws restrict how
active an S&L can manage their loan portfolio - otherwise they
would all become arbitrageurs and leave their nice safe offices out
in Queens and get a plush corner office on Wall street.

So, who out there in Pen-L land can help me with a useful response to
this nice student (yes, he is visting from mainland China, and yes
we had an interesting discussion about planning) before next Monday's
class?

Thanks
Jason Hecht


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Jason Hecht
Hecht@xxxxxxxxxxxxx
48 West 68th Street, Apt. 3A
New York, New York  10023-6015