nmental policy, and (2) the savings and loan crisis is not an isolated phenome non within the American financial environment. The current savings and loan crisis resulted in part from governmental actions, and is related to other quite recent financial sector debacles.
The problems which are being experienced by the savings and loan industry have been attributed to a number of factors. Chief among these factors cited by federal politicans, industry regulators, and media columnists are (1) fraud, (2) imprudent loans to the small players in the oil industry, and to real estate developers in states heavily dependent upon the oil industry, which, in each instance, were severely and adversely 3affected by the collapse of world oil prices in the mid 1980s, and (3) a widening gap in the interest rate margin between earning assets and funding liabilities, which resulted, in great part, from home owners defaulting on long term, high interest mortgages issued in the late 1970s. Fraud is the factor most often seized upon by the Bush Administration, because they think they can then pin the problem on some bad guy. Responsible estimates, however, limit fraudulent activi ties to approximately five percent of the total problem.
A factor mentioned only incidentally as a cause of the savings and loan problem is the role of the deregulation of the banking and finance industry in the United States. It isquite possible, however, that deregulation is either or both (1) an underlying cause, to some extent, of each of factors more generally cited as causes of the savings and loan problem, or (2) a primary cause of the savings and loan problem. The fundamental objective of deregulation in the United States is the same, regardless of the particular industry which was being deregulated, and regardless of the extent to which a particular industry was being deregulated. This fundamental objective is to permit industries to operate in ...