When was the savings and loan scandal

This growth was fueled by an influx of deposits as zombie thrifts began paying higher and higher rates to attract funds. Texas was the epicenter of the thrift industry meltdown. In it passed the Financial Institutions Reform, Recovery and Enforcement Act of that instituted a number of reforms of the industry. The thrift crisis came to its end when the RTC was eventually closed on December 31, Unfortunately, the commercial banking industry also suffered its own set of problems over this period, both in Texas and elsewhere.

This banking crisis also resulted in major reform legislation that paved the way for a period of stability and profitability… until Board of Governors of the Federal Reserve System.

Curry, Timothy, and Lynn Shibut. Federal Deposit Insurance Corporation. The flip-flop had a double whammy effect: the tax law caused too much real estate to be built, and the act then hurt the value of much of what had been built. Instead, these factors are symptoms or consequences of it. Delayed closure is the cause of the problem, and criminality is a consequence.

In any event, criminality accounted for only five billion dollars, or 3 percent, of the cost of the FSLIC bailout. Regulators, therefore, were the true abusers of brokered deposits. The regulators, however, usually failed to act on those findings. The CPAs were scapegoats for known problems the regulators should have quickly acted on.

In fact, junk bonds played a trivial role. For all practical purposes, both types of institutions operate today under the same regulatory regime. Bert Ely is head of Ely and Company, a financial institutions and monetary policy consulting firm in Alexandria, Virginia.

Everything's Bigger in Texas. The Keating Five Scandal. The Bottom Line. Key Takeaways The savings and loan crisis was the build-up and extended deflation of a real-estate lending bubble in the United States from the early s to the early s. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts.

We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. What Was the Garn-St.

Germain Depository Institutions Act? The Garn-St. Germain Depository Institutions Act was a U. The FHLB system established by the Act has grown over the years, and now provides funding for a wider range of financial institutions. Office of Thrift Supervision OTS The Office of Thrift Supervision was responsible for issuing and enforcing regulations governing the nation's savings and loan industry.

What Is a Zombie Bank? A zombie bank is an insolvent financial institution that only continues to operate thanks to either explicit or implicit government support. Partner Links. Related Articles. Commercial Banks: What's the Difference?

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