Failed Thrifts:

Internal Control Weaknesses Create an Environment Conducive to Fraud, Insider Abuse, and Related Unsafe Practices

T-AFMD-89-4: Published: Mar 22, 1989. Publicly Released: Mar 22, 1989.

Additional Materials:

Contact:

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

GAO discussed thrift management practices which primarily caused thrift insolvency and failure. GAO noted that: (1) the Federal Home Loan Bank Board (FHLBB) cited criminal activity, fraud, and insider abuse as the primary causes of thrift insolvency; (2) examination of 26 failed thrifts showed that 85 referrals for alleged criminal activity were made regarding 19 thrifts; (3) investigations led to 23 convictions, 19 pending indictments, and 2 acquittals; (4) internal control weaknesses leading to thrift insolvency and failure included inadequate board supervision, conflicts of interest, inadequate underwriting and loan administration, appraisal deficiencies, loan noncompliance, excessive compensation and expenditures, high-risk transactions, and inadequate or deceptive recordkeeping; (5) FHLBB cited legal requirements, inexperience, and lack of regulations and jurisdictional authority as factors in its untimely actions against thrifts; (6) to improve thrift supervision and oversight, FHLBB established an enforcement office, increased the number of thrift examiners and supervisors, and improved examiner training; and (7) several federal agencies have undertaken initiatives to address fraud and insider abuse problems in financial institutions. GAO believes that a presidential proposal to restructure the thrift industry and its insurers and regulators should include provisions to ensure independent industry supervision and examination and stronger internal controls.

Jul 18, 2018

Jul 17, 2018

Jul 16, 2018

Jun 28, 2018

May 31, 2018

May 24, 2018

May 10, 2018

Apr 17, 2018

Apr 5, 2018

Looking for more? Browse all our products here