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How To Ride A Housing Bubble

Golden West specializes in exotic mortgages -- and in surviving downturns

The story is familiar to anyone following the housing boom. A California savings and loan did a brisk business in adjustable-rate mortgages. People who previously couldn't afford homes piled in. Then the Federal Reserve started hiking interest rates, and mortgage payments began to climb. Home prices eventually started falling, making it harder for owners to sell or refinance. Analysts predicted a wave of defaults and much pain for shareholders.

The thing is, our yarn took place in 1994. The S&L in question was Oakland-based Golden West Financial Corp. (GDW ), which has offered its Pick-A-Payment loans since the U.S. government first allowed adjustable-rate mortgages, or ARMs, in 1981.