Deregulation Gone Awry: Moral Hazard in the Savings and Loan Industry

2008 ◽  
Author(s):  
Rebel A. Cole ◽  
Joseph McKenzie ◽  
Lawrence J. White
Keyword(s):  
Moral Hazard ◽  
Savings And Loan ◽  
Savings And Loan Industry

scholarly journals Real Interest Rates and the Savings and Loan Crisis: The Moral Hazard Premium

1992 ◽  
Vol 6 (1) ◽  
pp. 155-167 ◽  
Author(s):  
John B Shoven ◽  
Scott B Smart ◽  
Joel Waldfogel
Keyword(s):  
Moral Hazard ◽  
Interest Rates ◽  
Deposit Insurance ◽  
Real Interest Rates ◽  
Savings And Loans ◽  
Treasury Securities ◽  
Percentage Points ◽  
Savings And Loan ◽  
Savings And Loan Industry ◽  
The Government

Real interest rates shifted upwards by four or five percentage points in approximately 1980. The question is why. In this paper we review some of the more popular explanations and point out that they are somewhat inconsistent with the facts. We then present a new explanation which may partially account for the dramatic increase. We suggest that the upward shift in rates may be directly connected with the decade-long crisis in the savings and loan industry and the federal government's handling of that crisis. Owners and managers of troubled thrifts responded to the incentives provided by underpriced deposit insurance by offering higher and higher rates in an attempt to attract new funds. Depositors, anticipating that the government would protect their investments, actively sought out higher yields in local and national markets. The end result was that the rates offered by Treasury securities rose to compete with these quasi-risk-free substitutes sold by savings and loans. This added (and, indeed, continues to add) significantly to the federal government's borrowing costs. We calculate this increased cost under various assumptions about the effect of the S&L crisis on real interest rates.

“Heads I Win, Tails You Lose”: Deregulation, Crime, and Crisis in the Savings and Loan Industry

1990 ◽  
Vol 36 (3) ◽  
pp. 309-341 ◽  
Author(s):  
Kitty Calavita ◽  
Henry N. Pontell
Keyword(s):  
Corporate Crime ◽  
White Collar Crime ◽  
Manufacturing Sector ◽  
White Collar ◽  
Congressional Hearings ◽  
Savings And Loan ◽  
Thrift Industry ◽  
Savings And Loan Industry ◽  
Finance Capitalism

This study examines fraud in the savings and loan industry as a case study of white-collar crime. Drawing from extensive government reports, Congressional hearings, and media accounts, the study categorizes three types of savings and loan crime and traces them to the competitive pressures unleashed by deregulation in the early 1980s, within the context of a federally protected, insured industry. In addition, the study delineates the limitations of the enforcement process, focusing on the ideological, political, and structural forces constraining regulators. Although savings and loan crime is in many respects similar to corporate crime in the manufacturing sector, a relatively new form of white-collar crime, referred to as “collective embezzlement,” permeates the thrift industry. The study links the proliferation of collective embezzlement and other forms of thrift crime, as well as the structural dilemmas that constrain the enforcement process, to the distinctive qualities of finance capitalism.

Economies of scale in the US savings and loan industry: 1973–83

1990 ◽  
Vol 22 (2) ◽  
pp. 237-248 ◽  
Author(s):  
William A. Dowling ◽  
George C. Philippatos
Keyword(s):  
Economies Of Scale ◽  
Savings And Loan ◽  
The Us ◽  
Savings And Loan Industry
Sign in / Sign up

Export Citation Format

Share Document