Making the SAIF Safe for Taxpayers

The first concrete step toward resolving the decade-long thrift debacle was taken by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), which overhauled the federal savings and loan regulatory apparatus. A principal goal of FIRREA was to separate the cost of resolving the already insolvent thrifts (“zombie?” ) from the operations of the industry’s new deposit insurance fund. Because the Federal Savings and Loan Insurance Corporation was bankrupt, Congress created the Resolution Trust Corporation to dispose of the zombies. This receivership agency was to be funded primarily by taxpayers, while any costs related to federal insurance of deposits at healthy thrifts would be paid for by the thrift industry itself through the Federal Deposit Insurance Corporation’s Savings Association Insurance Fund (SAIF).