In the late 1980s, the United States faced a significant financial crisis involving savings and loan associations (S&Ls). This crisis ultimately led to the downfall of numerous S&L institutions and the insolvency of the Federal Savings and Loan Insurance Corporation (FSLIC). The repercussions of this crisis were substantial, costing taxpayers billions of dollars and playing a role in the recession experienced in 1990–91.
Savings and loan associations, also known as thrifts, were established to promote homeownership and community development by offering mortgages and other financial services. However, in the 1980s, many of these institutions made risky investments and loans that proved to be unsustainable. This risky behavior, coupled with a changing economic landscape, contributed to the S&L crisis.
As a result of these risky practices, numerous S&Ls experienced financial difficulties, leading to a wave of failures across the country. The collapse of these institutions not only devastated the individuals and communities they served but also put significant strain on the FSLIC, the agency responsible for insuring deposits in S&Ls. The FSLIC’s inability to cover the losses resulted in its own insolvency, leaving taxpayers to bear the burden of the bailout.
(Response: The S&L crisis culminated in the collapse of many savings and loan institutions, along with the insolvency of the Federal Savings and Loan Insurance Corporation. This crisis cost taxpayers billions of dollars and contributed to the recession of 1990–91.)