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Financial Institutions: Resolving the Savings and Loan Crisis

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Report Type Reports and Testimonies
Report Date Feb. 22, 1989
Report No. T-GGD-89-7
Subject
Summary:

GAO discussed and made recommendations on how best to resolve the savings and loan crisis. GAO found that: (1) the Federal Home Loan Bank Board's (FHLBB) emphasis on industry promotion and the Federal Savings and Loan Insurance Corporation's (FSLIC) lack of independence weakened the FSLIC risk management and insurance function; (2) in order to resolve the crisis, FSLIC needs at least $85 billion more than it anticipates receiving over the next 10 years; and (3) the FHLBB approach to resolving insolvent thrifts depends too heavily on complex assistance agreements that minimize its need for cash and require subsidies for up to 10 years. GAO believes that the full costs of resolving insolvent thrifts should be paid from adequately funded deposit insurance funds, rather than through special tax provisions. GAO made several recommendations regarding deposit insurance system restructuring, funding, and changes to insolvent thrift resolution.

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