eal estate--has been cited the cause of many of the banking failures subsequent to 1981. Between 1945 and 1981, however, failures in the economy were not exactly rare, and the bank failure rate did not rise with each significant downturn in the economy.
Another factor implicated in the bank failure rate in the early-to-mid-1980s was the deregulation of the financial sector of the American economy. Deregulation, by opening the door to activities to which different types of banking institutions had previously been excluded, resulted in the entry by many banking institutions into competitive markets where their experience and expertise was slight.
In March 1985, the Home Savings and Loan Association in Ohio failed. The Ohio thrift failure occurred two moths earlier than the first run on a savings and loan in Maryland. The Ohio experience should have alerted the thrift industry in Maryland, the state government in Maryland, and the federal banking regulators that something was wrong. If any of these parties had acted wisely and quickly, the savings and loan debacle in Maryland might have been avoided. All of these parties, however, sat on their hands and waited for the sky to fall, and fall it did. The failure of Homes Savings and Loan
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