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Financial Crisis Of The 1980s Essay

1094 words - 4 pages

The financial crisis of 2008 and 2009 is considered by others as the worst financial crisis since the Great depression of 1930. However there were other financial crisis which had happened after the Great depression which were equally disastrous. The one that comes in mind was the financial crisis of the 1980s and early 1990s. It is always overlook by others because of the 2008 credit crunch which happens to be the recent one. It became known as Savings and Loans crisis which basically let to substantial public-funded rescue of an industry that had crumpled and on it knees begging for help. The Savings and Loans crisis is smaller in nature compare to the banking crisis of 1920s and the 1930s. This crisis forced the state and federal regulatory and deposit banking insurance systems to their brim and finally leading to extensive changes to the regulatory environment. It was the bankruptcy of 1,043 savings and loan associations among the 3,234 savings and loan associations in the USA from 1986 to 1995.

Causes of the 1980s and Early 1990s S&L Crisis
Generally, one can say that there is no single cause that led to the increase in the failed financial institutions in the USA during the period between 1980s and early 1990s. Preceding to the beginning of the crisis, the laws and rules governing the financial markets were changing. The 1980 Depository Institutions Deregulation and Monetary Control Act took out many limitations and restrictions governing the economy and credit unions.
The Garn-St. Germain Depository Institutions Act of 1982 allows Savings and Loans to invest in real estate loans. Again, in the same 1980s, The Tax Reform Act of 1986 basically changed the financial environment thus causes the factors that contributed to the financial crisis within the period in the United States of America. Having done the changes in regulatory and economic landscape, persuaded a lot of excessive and unrestricted real estate loaning beginning in the late 1970s and keep on going on throughout the 1980s.

Another factor one can talk about also is fraud and other types of insider misconduct played a major role in the whole crisis. There were primarily looting or one can say control fraud that went on during the period that also help to fuel the banking crisis at the time. People who have inside trading information compromise their trust and gave information to those that were not suppose to be provided with such sensitive information as a results impacting on trading and causes a lot of loss to so many of these financial institutions at the time.

So many people including financial analysts believe as explain above to be the fundamental causes of the financial crisis of the time otherwise known as Savings and Loans(S&L)crisis . It brought serious economic problems in the early 1980s and early 1990s. It also led to the collapse in real estate and energy prices during the time.

The United States of America government took...

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