Deregulation and the partisan politics of the savings and loan crisis, 1970-1989
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Deregulation and The Partisan Politics of the Savings and Loan Crisis, 1970-1989, explores the politics of banking deregulation by examining the national policy response to the 1980s savings and loan crisis. Exploring the interactions among the key players in the policymaking process—congressional lawmakers, executive branch officials, interest groups, and regulators—this dissertation demonstrates that partisanship played a central role in turning the thrift industry’s problems into a hundred-billion-dollar economic disaster—the second worst banking fiasco of the twentieth century. By recasting the politics of the thrift debacle as more partisan and less cooperative, this dissertation challenges the conventional wisdom among political historians that deregulation was primarily a bipartisan enterprise. In doing so, this monograph undercuts the “neoliberal” narratives of post-1970 America that tend to depict Democrats and Republicans as one and the same on matters of regulation. The dissertation begins with President Richard Nixon’s appointment of the Hunt Commission. It recommended phasing out the New Deal interest ceilings known as Regulation Q. While Nixon’s own legislative efforts failed, the Hunt Commission’s suggestions influenced future discussions over deregulation. The high inflation and interest rates of the late 1970s and early 1980s shattered the thrift industry’s profitability and provided the political fuel to enact the Hunt Commission’s recommendations. In 1980, President Jimmy Carter and a Democratic Congress removed Regulation Q by passing the Depository Institution Deregulation and Monetary Control Act (DIDMCA). While the politics of DIDMCA reflected a bi-partisan approach, partisanship characterized the laws passed by the Ronald Reagan and George H.W. Bush administrations. In 1982, President Reagan and top Republicans ushered through the Garn-St Germain Act—the law that most contributed to the thrift disaster by permitting bankrupt thrifts to enter unfamiliar lending markets. Over time, these insolvent thrifts incurred large losses. Partisanship also bedeviled the efforts to clean up the resultant mess with the 1987 Competitive Equality Banking Act (CEBA) and the 1989 Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA). By delaying a timely solution, the partisanship in the late 1980s allowed the thrift situation to further deteriorate. Ultimately, the disaster cost American taxpayers 123.8 billion dollars.