The Savings and Loan Crisis of the 1980s

The Savings and Loan Crisis refers to a series of failing savings and loan institutions (S&Ls) in the late 1980s. The failure of hundreds of S&Ls in 1988 hurt investors and caused the U.S. government to bail out the industry with public funds. A policy set by the federal government before 1980 was one of the root causes of the Savings and Loan Crisis--federal deposit insurance. It was an unsound policy because it charged all S&Ls the same premium (interest rate) and overlooked their individual risks. It was the equivalent of charging everyone the same interest rate…