Deregulation, Insolvency and Greed: A Review of the Savings and Loan Crisis on the 1980's

Abstract

This paper is divided into three parts. The first part outlines the causes of the Savings and Loan shakeup in 1980. In this section the effects of deregulation are addressed as well as the issues of climbing interest rates. Other factors are considered as well such as the difficulties thrift institutions had "covering the spread" between interest received and interest paid. The second segment of part I outlines the issues of the second crisis. The second crisis is a direct result of the abuse of FSLIC deposit insurance, as well as a general lack of net worth in the thrift industry. The issue is further compounded by the lack of prompt action taken by supervisory members of the FSLIC and the bank board. In addition, the second segment of part I addresses possible solutions and analyzes the state of the industry today. The certainty of a thrift industry in the future is uncertain. Government forces are slow to move on a problem that could cost as much as $300 billion to repair. Part II of the Senior Project describes the workings of the Reynolds-Wells Corporation and its quest to provide real estate financing services. The steps of a transaction are outlined from start to finish. Further, my own contributions to the company are discussed. Part III of the Senior Project discusses some of my goals and plans for the future. More specifically, the areas of future course work, graduate school, employment, and life after Kalamazoo College are touched upon. Appendix A is composed of sample "tombstone" advertisements created by myself for implementation in various trade journals.