Lincoln Savings and Loan Crisis and the Keating Five

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The Savings and Loans Crisis of the 1980’s and early 90’s created the greatest banking collapse since the Great Depression in 1929. Over half the S & L’s failed, along with the FSLIC fund that was created to insure their deposits. From 1986 to 1989, the Federal Savings and Loan Insurance Corp. (FSLIC) closed 296 institutions with assets totaling $125 billion. With the creation of the Resolution Trust Corp. (RTC) in 1989 an additional 747 thrifts with assets totaling $394 billion were closed. That is a combined total of $519 billions in assets that contributed to a massive restructuring of the number of firms in the industry as stated by Curry & Shibut (2000). A resolution passed by Congress was the Financing Corp. (FICO), created in 1987 to provide funding to the FSLIC. FICO contributed $8.2 billion in financing. Then came the enactment of FIRREA, The Financial Institutions Reform, Recovery and Enforcement Act by Congress in 1989, which began the taxpayer’s involvement. The large number of failures overwhelmed the resources of the FSLIC, so US taxpayers were required to back up the commitment extended to insured depositors of the failed institutions. As of Dec. 31, 1999, the thrift crisis had cost taxpayers approximately $124 billion. ( Curry et al. 2000) FIRREA abolished the FSLIC and transferred its assets, liabilities and operations to the newly created FRF, Federal Resolution Fund, to be administered by the FDIC. The remainders of the monies were from the US Treasury and the Federal Home Loan Banks. Instead of the current administration making a swift and decisive action to deal with these insolvent institutions, there were many bureaucratic attempts to delay action so that the problems would not become a polit... ... middle of paper ... ...Loan Crisis. Retrieved July 17, 2010 from http://online.barrons.com.articleSB!123940701204709985.html Brooks, L.J. (2007) Business & Professional Ethics for Directors, Executives & Accountants. Mason, OH: Thomson South-Western. Curry & Shibut (2000), The Cost of the Savings and Loan Crisis: Truth and Consequence .Retrieved July 20, 2010 from www.fdic.gov/bank/analytical/banking/2000dec. Nash (1989), Showdown tie for Danny Wall. Retrieved July 25, 2010 from http:// www.nytimes.com/1989/07/09/business/showdown-time-for-danny-wall.html (Nowicki & Mueller (2007-03-01) McCain Profile: The Keating Five. Retrieved from http://www.azcentral.com/news/election.mccain/articles/2007/03/01.html Seidman, L. W. (1986) Lessons of the Eighties: What does the evidence show? Retrieved July 25, 2010 from http://www.fdic.gov/bank/historical/history/vol2/panel3.pdf

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