The FSLIC is “Broke” in More Ways than One

Abstract

As a result of both the savings and loan industry crisis that began earlier in the decade and inappropriate regulatory policies, the FSLIC is now “broke.” Its bankruptcy makes it principal among the thrift industry regulators because the plight of the FSLIC prevents it, as well as the other S&L regulators, from taking the actions needed to ensure the future prosperity of the industry. Regulators have been forced to make “second best” regulatory responses that are frequently so ineffective they render the system of regulatory policies itself “broke.” In turn, this set of destitute policies, together with punitive actions from Congress and the administration requiring healthy thrifts to bear the burden of industry clean-up, could conceivably bankrupt the entire savings and loan industry.