Savings And Loan Crisis - S&L

What is the 'Savings And Loan Crisis - S&L'

The Savings and Loan Crisis (S&L) is one of the largest financial scandals in U.S. history, the Savings and Loan Crisis emerged in the late 1970s and came to a head in the 1980s, finally ending in the early 1990s. In the volatile interest rate climate of the '70s, large numbers of depositors removed their funds from savings and loan institutions (S&Ls) and put them in money market funds, where they could get higher interest rates since money market funds weren't governed by Regulation Q, which capped the amount of interest S&Ls could pay to depositors. S&Ls, which were largely making their money from low-interest mortgages, did not have the means to offer higher interest rates, though they tried to once interest rate ceilings were dropped in the early '80s. As S&L regulations loosened, they engaged in increasingly risky activities, including commercial real estate lending and investments in junk bonds.

Also known as "thrifts".

BREAKING DOWN 'Savings And Loan Crisis - S&L'

Because S&L deposits were insured by the Federal Savings and Loan Insurance Corporation (FSLIC), depositors continued to put money into these risky institutions. A complex web of these factors and others, combined with widespread corruption, led to the insolvency of the FSLIC, the government bailout of the thrifts to the tune of $124 billion in taxpayer dollars and the liquidation of 747 insolvent S&Ls by the U.S. government's Resolution Trust Corporation. One of the largest S&L failures was that of Lincoln Savings & Loan, part of the Keating Five scandal which exposed the political corruption that was part of the S&L Crisis.

RELATED TERMS
  1. Resolution Funding Corporation ...

    A mixed-ownership government corporation established by Congress ...
  2. Asset Management and Disposition ...

    A type of contract between the Federal Deposit Insurance Corporation ...
  3. Federal Savings and Loan

    A federally chartered savings and loan is a banking institution ...
  4. Savings Association Insurance Fund ...

    A government insurance fund for savings and loans and thrift ...
  5. Building And Loan Associaiton

    It is a depository financial institution that is federally or ...
  6. Resolution Trust Corporation - ...

    A temporary federal agency established under the Financial Institutions ...
Related Articles
  1. Professionals

    Financial institutions: Banks

    Financial institutions: Banks
  2. Savings

    Understanding Savings Accounts

    A deposit account held at a bank or other financial institution that provides principal security and a modest interest rate.
  3. Economics

    Financial Regulations: Glass-Steagall to Dodd-Frank

    Here are some of the most important financial regulations that have been established.
  4. Brokers

    American Savings And Loan

    One of the biggest savings and loan companies to fall during the savings and loan crisis in the 1980s.
  5. Investing Basics

    What is a Bank?

    A bank is a financial institution licensed to receive deposits or issue new securities to the public.
  6. Professionals

    The Banking System

    CFA Level 1 - The Banking System
  7. Investing Basics

    How Banks Set Interest Rates On Your Loans

    On the face of it, figuring out how a bank makes money is a pretty straightforward affair. A bank earns a spread on the money it lends out from the money it takes in as a deposit. The net interest ...
  8. Investing Basics

    What Does a Financial Intermediary Do?

    A financial intermediary is an institution that acts as a go-between in a financial transaction.
  9. Savings

    Explaining Term Deposits

    A term deposit (more often called a certificate of deposit or CD) is a deposit account that is made for a specific period of time.
  10. Economics

    Understanding Term Loans

    A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
RELATED FAQS
  1. What measures could the U.S. Government take to prevent another crisis similar to ...

    Discover what measures the U.S. government could take to prevent another crisis similar to the S&L crisis. The S&L crisis ... Read Answer >>
  2. What is the difference between a savings & loan company and a bank?

    Find out how a savings and loan company, sometimes also known as a thrift or savings institution, focuses on different types ... Read Answer >>
  3. What major events and policy decisions led to the savings and loan crisis (S&L crisis)?

    Learn about the major events and policy decisions that led to the savings and loan crisis. The catalyst for the crisis was ... Read Answer >>
  4. What are the similarities and differences between the savings and loan (S&L) crisis ...

    Learn about some of the similarities and differences between the savings and loan crisis and the subprime mortgage crisis ... Read Answer >>
  5. What is the rate of return I can expect on a savings account?

    Find out what kind of return you can expect from the cash balance in your savings account and why interest rates have been ... Read Answer >>
  6. Why would you keep funds in a money market account and not a savings account?

    Read about the differences between money market accounts and savings accounts, and see why a depositor would elect a money ... Read Answer >>
Hot Definitions
  1. Goodwill

    An account that can be found in the assets portion of a company's balance sheet. Goodwill can often arise when one company ...
  2. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  3. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  4. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
Trading Center