THE SAVINGS AND LOAN DEBACLE: A Perspective from the Early Twenty-First Century

The savings and loan debacle of the 1980s was a costly but important learning event for depository regulation in the United States. The origins of the debacle lay in restrictive government regulation that eventually led to financial difficulties for savings and loan institutions in the late 1970s and early 1980s. The Congress and at least three presidential administrations delayed for far too long in undoing the restrictions. When the restrictions were loosened in 1980 and 1982, safety-and-soundness regulation also was weakened at just the time when it needed to be strengthened. The debacle followed, with an eventual cost of $160 billion. This essay is about that experience, and about the learning that has followed from it, as well as the lessons that (unfortunately) have yet to be absorbed.