An astute reader of this blog telephoned the other day to give me an earful about this article, which we included in our free weekly electronic newsletter last Thursday. He was specifically complaining about this paragraph:

It’s also the highest number of problem institutions the agency has reported at one time since March 31, 1993, when there were 928 banks characterized as problems. That was back when the nation was dealing with what became known as the Savings & Loan crisis — a series of scandals and collapses that ended up closing down nearly a quarter of the nation’s 3,200 thrifts and costing taxpayers $153 billion.

And he has every right to complain. The author of this article is absolutely wrong about the cost of the bailout to taxpayers. Bankers know that taxpayers did not bail out the S&Ls, but the banking industry did.

When the old insurance fund for S&L’s went bust, it was the banking industry that was called upon to finance the solution. Money was borrowed through FICO bonds, which the banking industry has been paying off through the Federal Home Loan Banks. In fact, those bonds are just about paid off.

It might be easy to say taxpayers took a big hit, but that doesn’t square with the facts. I would argue the true story about the banking industry funding the bailout of a competing industry is far more interesting than perpetuating a fantasy about taxpayers rescuing the banking industry.