Savings And Loan Crisis - S&L

AAA

DEFINITION of 'Savings And Loan Crisis - S&L'

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".

INVESTOPEDIA EXPLAINS '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. U.S. League Of Savings Institutions

    A now-defunct nationwide organization of savings institutions. ...
  2. Federal Savings and Loan

    A federally chartered savings and loan is a banking institution ...
  3. Depository Institutions Act of ...

    A law passed by Congress with the intent of making savings and ...
  4. Garn-St. Germain Depository Institutions ...

    A law enacted by Congress in 1982 to enable banks and other savings ...
  5. Commercial Bank

    A financial institution that provides services, such as accepting ...
  6. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
Related Articles
  1. Insurance

    Top 6 U.S. Government Financial Bailouts

    U.S. bailouts date all the way back to 1792. Learn how the biggest ones affected the economy.
  2. Home & Auto

    From Booms To Bailouts: The Banking Crisis Of The 1980s

    The economic environment of the late 1970s and early 1980s created the perfect storm for a banking crisis.
  3. Insurance

    Riding The Market Bubble: Don't Try This At Home

    Riding the bubble takes timing, a clear understanding of the market and, most of all, a lot of luck.
  4. Insurance

    A Nightmare On Wall Street

    These tales of banking terror sent shivers down the spines of even the most steadfast bankers.
  5. Mutual Funds & ETFs

    The 2007-08 Financial Crisis In Review

    If you don't know how the recession began, read on to learn more.
  6. Economics

    The New Global Banking Regulations To Avert Future Crisis

    These are the types of policies that are being developed to minimize the risks posed to the global financial system by banks which are too big to fail.
  7. Economics

    Where NOT To Invest in Latin America

    Venezuela has more oil than anyone, and Brazil and Argentina have lots going for them, too, so why can't they get out of their own way economically?
  8. Savings

    10 Mistakes To Avoid When Trying To Save Money

    Addressing the issue of saving money is the most fundamental, yet neglected aspect of personal finance in the U.S. today.
  9. Retirement

    Become A Certified Financial Divorce Analyst

    Use your financial knowledge to help people preserve their financial integrity after a failed marriage.
  10. Personal Finance

    Examining Credit Crunches Around The World

    Market tops and bottoms have proliferated the financial markets throughout history. Learn how countries dealt with these tough economic periods.

You May Also Like

Hot Definitions
  1. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  2. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  4. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  5. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  6. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
Trading Center