In the early 1980s, President Ronald Reagan’s administration initiated a sweeping campaign of deregulation across multiple industries, under the banner of “free-market capitalism” and “limited government.” One key sector that fell victim to this wave was the Savings & Loan (S&L) industry—a once-conservative, community-rooted banking system.

The Garn-St. Germain Depository Institutions Act of 1982, signed into law by Reagan, drastically loosened the rules that governed S&Ls. These institutions, previously restricted in the types of loans they could offer and interest rates they could charge, were suddenly unleashed into a Wild West of financial experimentation. The new law allowed them to make commercial loans, invest in high-risk ventures, and issue brokered deposits—practices they were ill-equipped to handle.

What followed was predictable to everyone except, apparently, the Reagan administration.

Thousands of S&Ls took advantage of the new rules to make speculative investments with federally insured deposits. Many were run by people who lacked experience—or ethics. Fraud became rampant, accounting gimmicks were used to mask losses, and aggressive lobbying slowed down oversight efforts. By the time the bubble burst in the late 1980s, over 1,000 S&L institutions had failed, costing U.S. taxpayers an estimated $132 billion in bailouts.

This financial disaster was a direct result of ideological blindness. The administration prioritized deregulation as a political and economic goal, ignoring the need for accountability and guardrails. In place of prudence, Reagan sold the nation a myth: that markets, left to their own devices, would police themselves.

They didn’t.

📌 Editorial Note

This is another one of those entries that’s hard to write without getting angry. The S&L crisis wasn’t a natural disaster. It wasn’t even an unpredictable economic downturn. It was the result of human choices—intentional deregulation, willful ignorance, and a stunning lack of foresight. The callousness of our leadership is not just a modern issue; it’s a persistent thread woven deep into the nation’s political fabric.

It forces us to confront a bleak truth: that in America, protecting the public good is often subordinated to ideology, campaign donations, and the myth of rugged individualism. What can we do about it? The answer isn’t glamorous. Vigilance. Adherence to law. Active citizenship. Accountability. And frankly, we’re not doing a great job on any of those fronts right now.

📚 Sources

  • Barth, J. R., Brumbaugh, D. R., & Wilcox, J. A. (2000). The Repeal of Glass–Steagall and the Advent of Broad Banking. Journal of Economic Perspectives, 14(2), 191–204.
  • FDIC (1997). History of the Eighties – Lessons for the Future: An Examination of the Banking Crises of the 1980s and Early 1990s.