What was the savings and loan bailout

October 11, November 8, October 5, September 23, September 16, September 13, September 3, September 2, September 1, November 10, October 28, October 26, October 7, October 4, September 24, September 20, July 1, December 17, October 9, September 30, June 24, March 4, August 30, May 31, March 1, Ultimately, taxpayers were called upon to provide a bailout, and Congress was forced to act with significant reform legislation as the s came to a close.

These institutions were originally organized by groups of people who wished to buy their own homes but lacked sufficient savings to purchase them. In the early s, banks did not lend money for residential mortgages. The members of the group would pool their savings and lend them back to a few of the members to finance their home purchases. As the loans were repaid, funds could then be lent to other members.

But they were nevertheless important conduits for the U. Losses began to mount. As a result, the regulatory response was one of forbearance — many insolvent thrifts were allowed to remain open, and their financial problems only worsened over time.

A number of states also enacted similar or even more expansive rules for state-chartered thrifts. From to , thrift industry assets grew 56 percent, more than twice the 24 percent rate observed at banks. 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. 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. About the Author Bert Ely is head of Ely and Company, a financial institutions and monetary policy consulting firm in Alexandria, Virginia. Further Reading Ely, Bert. Ely, Bert, and Vicki Vanderhoff. Report No.

Lewisville, Tex. Fand, David. Hector, Gary. Kane, Edward J. Cambridge: MIT Press, Read This Article.