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. Federal Savings And Loan Insurance ...

    The Federal Savings and Loan Insurance Corporation (FSLIC) is ...
  6. Resolution Trust Corporation - ...

    A temporary federal agency established under the Financial Institutions ...
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