Further Reading
Sauvé, Jeanne.Selected Decisions of Speaker Jeanne
Sauvé, 1980-1984/Recueil de Décisions du Président
Jeanne Sauvé, 1980-1984. Ottawa: House of Com-
mons Canada, 1994.
Wallin, Pamela, and Tim Kotcheff.Jeanne Sauvé.To-
ronto: CTV Television Network, 1989.
Woods, Shirley E.Her Excellency Jeanne Sauvé.To-
ronto: Macmillan of Canada, 1986.
Martin J. Manning
See also Canada Act of 1982; Canada and the Brit-
ish Commonwealth; Canada and the United States;
Meech Lake Accord; Trudeau, Pierre.
Savings and loan (S&L) crisis
The Event Deregulation leads to a national
banking crisis
The S&L crisis of the 1980’s, during which one thousand
savings and loan associations across the United States
failed, was the nation’s largest-ever financial scandal and
cost American taxpayers and depositors billions of dollars
in bailouts, contributing to large budget deficits and possi-
bly to the 1990’s recession.
The events leading up to the S&L crisis began dur-
ing the Jimmy Carter and Ronald Reagan adminis-
trations in the late 1970’s and the early 1980’s, when
the government removed many of the federal regu-
lations on banks in a laissez-faire approach designed
to make banks more competitive on the open mar-
ket. Until then, federal law had required savings
banks to maintain maximum interest rates on sav-
ings accounts and had prohibited them from issuing
checking accounts or credit cards. Savings banks
also could not make commercial or nonresidential
real estate loans. On the other hand, unlike savings
banks, commercial banks could, when necessary,
borrow from the Federal Reserve Bank. Under de-
regulation, savings and commercial banks became
almost indistinguishable. One result of this situation
was an immediate increase in savings and loan insti-
tutions, or S&L’s, which, under the supervision of
the Federal Home Loan Bank Board and insured by
the government’s Federal Savings and Loan Insur-
ance Corporation (FSLIC), could for the first time
freely venture into lucrative commercial real estate
markets and issue credit cards. By 1980, there were
forty-six hundred such institutions in the United
States. However, this trend quickly reversed when
the S&L crisis began: By the end of the 1980’s, there
were only three thousand S&L’s left, and five years
later, that number had been reduced to less than two
thousand.The Crisis Looms Deregulation resulted in the
growth of the U.S. economy during the 1980’s, espe-
cially in the real estate sector. This growth enticed
many of the underregulated S&L’s to invest in high-
risk, speculative ventures; it also tempted unscrupu-
lous executives to defraud the regulatory agencies.
Thus, when the real estate market faltered and fell,
the S&L’s found themselves in dire circumstances,
because they owned real estate that was worth less
than they had paid for it. Numerous bankruptcies
ensued, and a great number of S&L depositors lost
their money. Indeed, many lost their entire life sav-
ings.
In 1988, the Federal Home Loan Bank Board,
whose function it was to supervise the S&L’s, re-
ported that fraud and insider abuse were the pri-
mary causes of the S&L failures. The head of Lin-
coln Savings of Phoenix, Arizona, Charles Keating,
came to be known as the worst of the abusers. With
full knowledge that Lincoln Savings was about to be-
come insolvent, Keating removed $1 million from
the S&L. He was eventually convicted of fraud, rack-
eteering, and conspiracy and spent four and one-
half years in prison. His conviction was then over-
turned, and he pleaded guilty to bankruptcy fraud
to avoid a new trial. Before his conviction, however,
Keating attempted to secure the aid of five U.S. sena-
tors in avoiding regulatory sanctions for his com-
pany. When the relationship between Keating and
the senators became public, a national scandal en-
sued, and the senators became known as the Keating
five.
Congress and various states attempted to respond
to the S&L crisis during the early and mid-1980’s,
but their stopgap measures were insufficient. Even-
tually, in 1989, newly elected president George H. W.
Bush engaged in a full-scale federal bailout of the in-
dustry. He estimated, to the shock of the country,
that the government would have to spend between
$50 billion and $60 billion. Congress enacted the Fi-
nancial Institutions Reform, Recovery, and Enforce-
ment Act (FIRREA). It ensured oversight of the
S&L’s and eliminated the Federal Home Loan Bank844 Savings and loan (S&L) crisis The Eighties in America