Board, which had failed to effectively supervise the
S&L industry. The government also created the Of-
fice of Thrift Supervision (OTS).
Impact The 1980’s were characterized by deregula-
tion of industry in general, which had been a major
plank in President Reagan’s platform and was at the
center of his economic philosophy. The deregula-
tion of the banking industry that led to the S&L cri-
sis, however, was begun by Reagan’s predecessor,
Jimmy Carter. The ensuing financial disaster be-
came a major threat to the U.S. financial system. The
crisis severely dampened the Republican Party’s en-
thusiasm for deregulation, and it changed the terms
of the debate about financial policy in the United
States.
It soon became clear that President Bush had
grossly underestimated the cost of the S&L bailout.
Economists have estimated the final cost of the crisis
at $600 billion. The savings and loan crisis, in turn,
contributed to the severe budget deficits of the early
1990’s, as well as to a major slowdown in both the fi-
nance and the real estate markets, and arguably to
the 1990-1991 economic recession.
Further Reading
Adams, James R.The Big Fix: Inside the S&L Scandal—
How an Unholy Alliance of Politics and Money De-
stroyed America’s Banking System. New York: Wiley,
- The author, a well-known freelance journal-
ist, examines the savings and loan crisis by look-
ing at the history of American banking dating
back to the Great Depression.
Barth, James, Susanne Trimeth, and Glenn Yago.
The Savings and Loan Crisis: Lessons from a Regula-
tor y Failure. New York: Springer, 2004. Claims to
set the record straight about the poorly super-
vised banking practices of the 1980’s that resulted
The Eighties in America Savings and loan (S&L) crisis 845
Three members of the Keating five, from left, Senators John Glenn, Dennis DeConccini, and John McCain, arrive at the Senate Committee
on Ethics hearing room in November, 1990. The five faced charges of peddling their influence to help Charles Keating, the man at the heart
of the S&L crisis.(AP/Wide World Photos)