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The Cost of Buying Time: Lessons from the Thrift Debacle

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The collapse of the Federal Savings and Loan Insurance Corporation's (FSLIC) deposit insurance fund, coupled with the subsequent appropriation of taxpayers' money to underwrite the cleanup of the thrift industry, ranks as one of the greatest financial disasters of our time. When all is said and done, around $200 billion (in 1990 dollars) will have been spent to honor the claims of depositors in closed thrifts and to dispose of failed-thrift assets. To put this number into perspective, the combined loan guarantees for Lockheed, New York City, and Chrysler Corporation in the 1970s were only about $9 billion in equivalent dollars.

The collapse of the Federal Savings and Loan Insurance Corporation's (FSLIC) deposit insurance fund, coupled with the subsequent appropriation of taxpayers' money to underwrite the cleanup of the thrift industry, ranks as one of the greatest financial disasters of our time. When all is said and done, around $200 billion (in 1990 dollars) will have been spent to honor the claims of depositors in closed thrifts and to dispose of failed-thrift assets. To put this number into perspective, the combined loan guarantees for Lockheed, New York City, and Chrysler Corporation in the 1970s were only about $9 billion in equivalent dollars.


Suggested citation: Thomson, James B., 1993. "The Cost of Buying Time: Lessons from the Thrift Debacle," Federal Reserve Bank of Cleveland, Economic Commentary, 01.01.1993.

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