Savings and Loans were originally designed as community thrift institutions geared towards helping working class American families save for owning a home. As interest rate volatility in the 1970s brought on by rampant inflation caused S&Ls to lose money, pressure mounted to relax regulatory standards and allow riskier, higher yield investment speculation involving high-profile commercial real estate backed by junk bonds. Losses continued to mount, however, and by the 1990s, over 1000 S&Ls had failed (out of a total of about 3000), costing tax payers approximately $160 billion through the Resolution Trust Corporation. Until the financial crisis of 2008, it was the most expensive banking bailout in US history.
— References —
– Big Money Crime: Fraud and Politics in the Savings and Loan Crisis, Calavita (1999)
– Money for Nothing – Inside the Federal Reserve, Bruce (2013)
– New Economic Perspectives – William K. Black – http://neweconomicperspectives.org/category/william-k-black
– Garn-St Germain Depository Institutions Act of 1982 – https://www.federalreservehistory.org/essays/garn_st_germain_act
– Organized Crime, The CIA and the Savings and Loan Scandal – http://www.thirdworldtraveler.com/CIA/S%26L_Scandal_CIA.html