Failed Financial Institutions:

Reasons, Costs, Remedies, and Unresolved Issues

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

Additional Materials:


Office of Public Affairs
(202) 512-4800

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.

Jun 28, 2018

Jun 21, 2018

Apr 3, 2018

Feb 6, 2018

Oct 12, 2017

Oct 2, 2017

  • budget icon, source: GAO

    U.S. Territories:

    Public Debt Outlook
    GAO-18-160: Published: Oct 2, 2017. Publicly Released: Oct 2, 2017.

Sep 20, 2017

May 3, 2017

Jan 18, 2017

Jan 17, 2017

Looking for more? Browse all our products here