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S and L

The document outlines the key players involved in the savings and loan market, including the federal government, Congress, depositors, and taxpayers. It discusses the vulnerabilities of savings institutions due to reliance on short-term deposits amid rising interest rates, leading to extensive losses and insolvency issues, referred to as 'Zombies.' Additionally, it highlights the impact of the Garn-St. Germain Depository Institution Act on monetary policy and the federal government's response during financial crises.

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Monsur Bolaji
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36 views1 page

S and L

The document outlines the key players involved in the savings and loan market, including the federal government, Congress, depositors, and taxpayers. It discusses the vulnerabilities of savings institutions due to reliance on short-term deposits amid rising interest rates, leading to extensive losses and insolvency issues, referred to as 'Zombies.' Additionally, it highlights the impact of the Garn-St. Germain Depository Institution Act on monetary policy and the federal government's response during financial crises.

Uploaded by

Monsur Bolaji
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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(A)

FROM THE INCEPTION TO THE DEMISE OF THE SAVINGS AND LOAN MARKET ROLE,THE PLAYERS ARE AS
FOLLOW:

1.The Federal Government.

2.Congress(policy makers).

3.Depositors.

4.Tax payers.

(B)

SHORT OF THE REGULATION WHICH AFFECTED SAVINGS AND LOAN MARKET

The reliance on deposits with short maturities for funding made savings institution vulnerable to
increases in interest rates. As inflation accelerated and interest rate began to rise rapidly,many savings
and loan began to suffer extensive losses. The rate they had to pay attract deposits rose sharply but the
amount they earned on long-term fixed rate mortgages change and losses began. As may thrifts became
insolvent,their financial problems only worsened over time,they came to be known as “Zombies”.

(C)

GARN-ST. GERMAIN DEPOSITORY INSTITUTION ACT WAS BASED ON THE BELOW INFORMATION:

The Garn-St. Germain depository institution act was based on government regulation policy
implemented and oversight by the government itself through the services of professionals. As
depositors used the new accounts to shift funds from money to near money(highly liquid asset that can
be turned into cash),the federal experienced increasing difficulties in conducting monetary policy. At the
time,the federal guided the economy by controlling supply of money. Deposit shift made the velocity of
money make it difficult to predict and the federal subsequently changed its operating procedures to
avoid the problem. During the recent financial crisis,the pendulum swung again when US treasury used
the troubled asset relief program to inject capital troubled firms and the federal FDIC provided
unprecedented financial assistance to financial instititions.

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