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I Introduction In the 1980s the United States experienced its most serious banking crisis since the 1930s and the second most serious crisis in its 200-plus year history The crisis affected commercial banks savings banks and savings and loan associations S Ls Between 1980 and 1991 when fundamental corrective laws were enacted some 1500 commercial and savings banks insured by the Federal Deposit Insurance Corporation and 1200 savings and loan associations insured by the former Federal Savings and Loan Insurance Corporation failed and were resolved by the regulatory agencies These resolutions represented about 10 percent of all banks at the beginning of the period and 25 percent of all S Ls In addition an even larger number of institutions were in precarious financial condition at some time during this period The costs of the failures were high not only to the shareholders of the failed institutions but also to the surviving institutions which were required to pay premiums to the deposit insurance agencies and to US taxpayers who were forced to make good on the losses after the resources of the SL insurance fund had been exhausted For banks the loss to the FDIC and thus to other solvent banks was about 40 billion For S Ls the loss was near 200 billion some 150 billion of which was beyond the resources of the FSLIC and was therefore charged to US taxpayers The losses accrued primarily to the federal insurance agencies and taxpayers rather than to depositors and other creditors because the insurance effectively guaranteed the par value of deposits up to 100000 per account de jure and except at some small banks almost any amount of deposits and even borrowings de facto regardless of the value of the banks assets The FDIC and the former FSLIC were funded by premiums imposed on banks and S Ls respectively and both had implicit access to the US Treasury that legislators
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