Savings & Loan Crisis
What It Is
The Savings & Loan (S&L) Crisis of the 1980s involved the collapse of over 1,000 thrift institutions due to deregulation, risky lending, and interest rate mismatches.
Why It Matters
It was one of the most expensive financial crises in U.S. history, costing taxpayers over $100 billion.
How It Happened
- Deregulation allowed S&Ls to take on riskier loans
- High interest rates squeezed margins
- Fraud and poor oversight
- Real estate bubbles in several regions
Key Components
- Interest rate risk
- Moral hazard
- Real estate exposure
- Regulatory failures
Example
Lincoln Savings & Loan became the symbol of the crisis after massive fraud and losses.
Key Takeaways
- Deregulation without oversight is dangerous.
- Interest rate mismatches can destroy institutions.
- The crisis reshaped thrift regulation.