ABSTRACT
The thrift industry approached collapse in 1982. Operating losses and deposit outflows came close to exhausting the regulatory agencies’ capacity to keep the savings institutions afloat. At that point, massive federal intervention, akin to nationalization of the industry, would have been required to protect depositors and maintain stability in financial markets. Despite a more favorable economic and regulatory climate after midyear, the pattern observed in 1981—of negative operating income leading to declining net worth and consolidation through merger—continued unabated through 1982. Thrifts were unable to attract and retain the retail deposits that have been the core of their liability structure. Interest rate ceilings under regulations of the Depository Institutions Deregulation Committee continued to play a role in the liability structure of the thrifts. Interest income on mortgage loans remained the largest component of gross earnings for the thrifts. Higher rates on new mortgages and the gradual repayment of lower-rate loans contributed to a continuing rise in interest income.
