Legislative and regulatory policies extended and finally heightened the difficulties regarding the savings and loan industry. The “Alice in Wonderland” regulatory accounting axioms (RAP) employed by the regulators contributed into the tragedy.
It’s estimated that the price of the cost cost savings and loan debacle shall price taxpayers $183 million plus interest. Actions taken by Congress and regulators, in addition to regulatory accounting maxims (RAP), have now been widely cited as major contributing factors for having “misled” and “masked” the speed and degree associated with the monetary deterioration associated with thrift industry. A larger comprehension of the magnitude and way where the actions of Congress and regulators therefore the utilization of RAP contributed to your extent of losings experienced by the thrift industry may help those attempting to work through what went incorrect.
Although countless factors impacted the seriousness of losings experienced by the thrift industry, there have been four major legislative and regulatory policy objectives:
1. Enhance both the short-term and long-term survival that is economic of thrift industry by decreasing the industry’s contact with rate of interest danger through asset diversification;
2. “Bide” time for legislative and regulatory efforts to impact a financial data recovery by assisting the avoidance of violations of capital needs by difficult thrifts which may end up in regulatory supervision and/or dissolution (“forbearance”);