The Savings and Loan Crisis

James R. Barth is Lowder Eminent Scholar in Finance at Auburn University and Senior Finance Fellow at the Milken Institute.

Robert L. Bartley Editor Emeritus, The Wall Street Journal As this collection of essays is published, markets, regulators and society generally are sorting through the wreckage of the collapse in tech stocks at the turn of the millennium. All the more reason for an exhaustive look at our last "bubble," if that is what we choose to call them. We haven't had time to digest the lesson of the tech stocks and the recession that started in March 2001. After a decade, though, we're ready to understand the savings and loan "bubble" that popped in 1989, preceding the recession that started in July 1990. For more than a half-century, we can now see clearly enough, the savings and loans were an accident waiting to happen. The best insurance for financial institutions is diversification, but the savings and loans were concentrated solely in residential financing. What's more, they were in the business of borrowing short and lending long, accepting deposits that could be withdrawn quickly and making 20-year loans. They were further protected by Regulation Q, allowing them to pay a bit more for savings deposits than commercial banks were allowed to. In normal times, they could ride the yield curve, booking profits because long-term interest rates are generally higher than short-term ones. This world was recorded in Jimmy Stewart's 1946 film, It's a Wonderful Life.

What Have We Learned from the Thrift and Banking Crises of the 1980s?.- The Savings and Loan Debacle: A Perspective from the Early Twenty-First Century.- Some Hope for the Future, after a Failed National Policy for Thrifts.- Regulatory Regimes and Markets: The Case of Savings and Loans.- The Savings and Loan Crisis: Unresolved Policy Issues.- Macroeconomic Sources of the U.S. Savings and Loan Crisis.- What Lessons Might Crisis Countries in Asia and Latin America Have Learned from the Savings and Loan Mess?.- The Lessons of U.S. Savings and Loan Institutions: and International Development Perspective.- The Lesson of Lincoln: Regulation as Narrative in the Savings and Loan Crisis.- Lincoln Savings: a Coda.- The U.S. Savings and Loan Crisis in Hindsight 20 Years Later.- The Savings and Loan Crisis: Five Illustrative Case Studies.- Summing up: Do Savings and Loans Provide a Useful Perspective?.- A Roundtable on the Savings and Loan Crisis.