ABSTRACT
The year is 1990, and America has just endured one of its worst fiscal crises in over 60 years. In order to foster competition, the U.S. government had previously encouraged its citizens to frequent their local small-scale lending institutions, known as “savings and loans,” or “S&Ls.” In large numbers, individuals and small businesses used these S&Ls for everything from obtaining mortgages and securing car loans to establishing business lines of credit. For more than ten years, small lending institutions essentially had unrestricted management of their investment portfolios. During that time, these banks provided real estate and commercial loans to those organizations and individuals they deemed worthy. As you will learn at the close of this chapter, the result was that savings and loan corporations were assuming far more risk than could reasonably be considered prudent. In addition to substantial investments in “junk” bonds and risky stocks, many of the senior officers of these institutions were using the funds entrusted to them for personal “loans,” purchasing luxury items such as multi-million dollar yachts and extravagant art collections. At the conclusion of the crisis, nearly $500 billion in taxpayer funds had been spent in an effort to stop the financial damage caused by the savings and loan crisis.
