number of factors. Chief among those factors cited by the Bush Administration, the Congress, and industry regulators (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 affected 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.
There was another factor involved in the problems of the thrift industry; however, both the Bush Administration and most members of Congress were reluctant to mention it, because to do so would cast doubt on one of the most sacrosanct of current government policies deregulation. It was quite possible even probable, however, that deregulation was either or both (1) an underlying cause, to some extent, of each of factors more generally cited as causes of the thrift industry problem, or (2) a primary cause of the problems being experienced by the industry.
The banking industry in the United States developed "concurrently with the growth in population, agriculture and manufacturing output, and transportation facilities" (Fenstermaker 54). The types of banks and their functions which existed in the early years of the country were largely determined by the state governments, because little federal control over banking existed.
Real estate banks first appeared in the south in 1827. The purpose of these early real estate banks was similar to that of the building and loan societies, and other types of thrift institutions which developed later in the country's history. Today's savings and loan associations are the descendants of the real estate banks, and the building and loan societies.
The regulation of financia...