Crisis in S & L Institutions
During the decade of the 1980s, many experts est
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During the decade of the 1980s, many experts estimate that at least $250 billion dollars was either stolen or remains unaccounted for by some of America's Savings and Loan institutions. If one multiplies that out for the population of the United States as a whole, the figure assessed every citizen would be well over $1000.00 per person. Of course, that does not account for the billions of dollars that will be spent on the interest payments over the next forty years, assuming that this problem will be solved. One immediately must ask just how this situation came into being and what the solutions are for its resolution. Surely, with the regulatory agencies in place a crisis of this magnitude would be impossible to imagine. Republican Representative Jim Lewis of Iowa, who had been warning of this for many years, commented that:It's the single greatest accounting misjudgment this century. It's the largest lapse on the part of the press. It's the single greatest regulatory lapse of this century. It's the single greatest indicator of the defer at all costs approach to government in this century (Waldman and Thomas, 1990, p. 27). This paper will provide an overview of the Savings and Loan crisis by first giving the immediate background of the industry. The paper will then turn to an overview of the current crisis, and will then emphasize some of the solutions offered for its resolution. Finally, the paper will conclude with an analysis of the role of the U.S.
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that many S&Ls have used private funds for speculative ventures in order to enrich their own directors. In essence, many of the S&Ls were lending money far faster than their deposits increased, often losing the money on speculative or other unprofitable ventures. The crisis reached such proportions that the government has been forced,
. . . under pressure from Congress, the Justice Department has been beefing up the staff and budget devoted to the scandals. The agency has $110 million to spend this year, which has enabled it to hire 368 more financial fraud investigators, as well as 202 FBI agents and 118 more assistant U.S. attorneys. Congress may provide further help. One bill would create 'strike forces' to investigate fraud and provide higher salaries for prosecutors of bank crimes. Says Nancy Kassenbaum, the Kansas Republican who introduced the measure in the Senate last week: 'It is time to take off the gloves and unleash our best and brightest prosecutors on the mess" (Gallagher, 1990, p.43).
Disasters began to strike in the S&L industry in the early 1980s, but as the amount and monetary responsibility of each grew in magnitude, the FSLIC was unable to continue to pay the premiums from bankrupt S&Ls. One s
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Approximate Word count = 1457
Approximate Pages = 6 (250 words per page)
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