The Savings and Loan Crisis of the 1980s was driven by interest rate spikes, deregulation, and aggressive and often poor-quality lending, which left mutual savings banks and thrifts suffering losses due to fixed-rate mortgage loans yielding less than the cost of the institution’s deposit liabilities. Though these institutions were not members of the Federal Reserve System, they appealed to Congress, which pressured the Fed. This resulted in the Fed embracing the position that it was the lender of last resort to all solvent financial institutions.
Glossary Term