S&L Bailout: Assessing the Impact

June 22, 1990

Report Outline
Special Focus


Most experts agree that rapid deregulation and lax supervision led to the S&L crisis—a financial disaster that could run well over $100 billion. But there is wide disagreement over how serious the future economic impact of the S&L bailout will be, and there is also disagreement over what should be done to prevent a similar crisis from happening again. Nevertheless, some effects are already being felt, and it is clear that Americans should prepare for major changes in the way they save and borrow money.

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It's been compared to Three Mile Island and even Chernobyl, the financial equivalent of a nuclear power plant meltdown. The failure of hundreds of savings and loan institutions over the past decade overwhelmed the federal deposit insurance fund, forcing taxpayers to pick up the tab. The S&L bailout is the biggest financial disaster in this country's history. Policy-makers and regulators agree that something must be done to prevent a future financial meltdown. But there is widespread disagreement over what policy changes are needed to correct the thrift industry's lingering problems.

To begin with, no one really knows just how much it will cost to close down the more than 1,000 failed savings and loans. Estimates vary widely, but virtually all exceed $100 billion. One thing is certain: It will cost much more than anyone originally anticipated.

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