Failed Financial Institutions:

Reasons, Costs, Remedies, and Unresolved Issues

T-AFMD-89-1: Published: Jan 13, 1989. Publicly Released: Jan 13, 1989.

Additional Materials:

Contact:

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

GAO discussed: (1) characteristics and management practices of failed financial institutions; (2) the Federal Home Loan Bank Board's (FHLBB) recent resolution actions; and (3) actions to prevent the crisis from recurring. GAO found that: (1) in 1987, 203 commercial banks closed at an estimated net cost of $3 billion and, in 1988, the number increased to 221; (2) in 1988, the Federal Savings and Loan Insurance Corporation (FSLIC) acted on 222 problem institutions at a cost of $37 billion and left 350 insolvent thrifts still operating; (3) based on a $27-billion resource estimate to pay for insurance losses, FSLIC would need an additional $50 billion to pay for insurance losses through 1998; (4) many thrifts failed because of internal control weaknesses, over-reliance on volatile funding sources, poor loan administration, appraisal deficiencies, and insider fraud and abuse; (5) FHLBB budget constraints imposed staffing and pay limits and forced it to handle only critical situations and turn examinations over to district banks; (6) FHLBB was prevented from liquidating many insolvent thrifts due to the FSLIC financial condition and began to rely on finding merger partners for troubled thrifts; (7) FHLBB had uncertain regulatory control over state-chartered thrifts; and (8) the dual roles of FHLBB and district banks hampered regulation. GAO believes that Congress needs to consider: (1) containing and resolving the immediate FSLIC financial crisis; and (2) establishing an independent FSLIC to insure, regulate, and supervise the thrift industry.

Jul 21, 2016

Jun 23, 2016

May 12, 2016

Apr 14, 2016

Mar 4, 2016

Oct 30, 2015

Sep 9, 2015

Aug 17, 2015

Jul 9, 2015

Apr 27, 2015

Looking for more? Browse all our products here