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The Savings And Loans Crisis Of The 1980s

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The Savings and Loans crisis of the 1980s was one of the most impactful crises in American history which was caused by a buildup of neglect and greed from S&L owners and government officials who let wound fester and infect the S&L industry. (Purdy, 2023) One of those greedy owners was Charles Keating who was an influential figure in the savings and loan business. He was the chairman of Lincoln Savings and Loan Association with a craving to earn as much money as bank owners. He was widely known for his incredibly risky ventures and aggressive lending tactics, they were practically trademarks of Keating's business, which ultimately caused the institution's failure in 1989. (Were Bankers Jailed?)
Keatings greed caused a statewide, which soon after turned into a nationwide crisis and cost taxpayers over 160 billion and sent America into a huge …show more content…

Considering the lack of responsibility these governors had for their people it's truly disgusting how they were not arrested and that the taxpayers were the ones who had to pay for their greed. These powerful figures get away with so much that it can become infuriating to watch, as citizens suffer with unemployment, inflation, unaffordable necessities it just powers their yachts and fancy champagne. Corruption is deeply rooted in the government and will continue to wreak havotic upon society for as long as one may let it, hopefully one day everyone will receive the same justice no matter their social

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In Addition to maldistribution stood the credit structure of the economy, some farmers were in deep land mortgage debt, so they lowered their crop prices in order to regain credit, and because the farmers were no longer accountable for what they owed banks. Across the nation the banking system found themselves in constant trouble. In America both small and large bankers were concerned for their survival, so they began investing recklessly in stock markets and granting unwise loans. These unconscious decisions would lead a large consequence, such as families losing their life savings and their deposits became uninsured. “ More than 9,000 American banks either went bankrupt or closed their doors to avoid bankruptcy between 1930 and 1933.”Although

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The FDIC was created in 1933 in response to the thousands of bank failures that occurred in the 1920s and early 1930s. The FDIC was a provision of the Glass-Steagall Act. During the nine year period from 1921-1929 more than 600 banks failed each year. The failed banks were small banks operating in the rural suburban areas and held the deposits of mostly farmers and blue collar folks. When banks fold and continue to do so, people will start to worry about their money in any bank.

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The FDIC protected the deposits of individuals at banks by insuring up to 2,500 dollars of their deposit. This policy, along with other efforts to mend the faults in the banking system, were established in the banks across the country. By doing this, bank closures that had become extraordinarily prevalent in the early 1930’s were almost nonexistent in 1934 and beyond; many financial institutions during the Roaring 20’s invested money in unstable stocks in hopes of making significant gains, and this played a major role in the bank failures following the stock market crash. By restricting the banks and requiring them to insure the deposits of American citizens, the FDIC was successful in making the banking systems of America safer and more

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“Morgan founded the banking company J.P Morgan.co, one of the leading financial firms in the country in 1871.” “ He was criticized for creating monopolies by making it difficult for only business to compete against his.” J.P Morgan controlled the lending money throughout the united states, at one point in 1907 known as the “Panic of 1907” a financial crisis almost led to a depression. Morgan took charge and the united states government was borrowing money from Morgan to keep our country government functioning. Morgan and his investors had financial interest in most big business in the united states.

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In the peak of the Great Depression, millions of Americans lost all of their money due to bank runs that used up all of the money in the reserves. Prior to the Depression, there was nothing to insure that your money was truly protected in your bank account. The provision to create an organization that insures all deposits in national banks kept our economy stable. Frontrunner of the Act, Henry Steagall, was insistent upon putting the provision into the act despite its controversial nature. Steagall advocated for this provision with small, rural banks in mind but was opposed by large banks because they believed that they would “end up subsidizing small banks” (Maues).

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Economic issues are not uncommon in America. The panic of 1837, Depression during the 1920’s, stock market crash in 1929, $17 trillion debt America is in today, and a multitude of other issues are all proof that America is perhaps less financially stable than it seems to be. The Bank War is one of the many puzzle pieces that fit together in the intricate financial history of the United States. Linking Jackson’s role in the Bank War directly to the Panic of 1837 would not only be inaccurate, but would deny the complexity of other causes that were contributing factors. A further analysis of the sequence of events revolving around the Bank War depict that Jackson is only one of many other causes that led to the Panic of 1837.

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The Banking Act of 1935 regulated the nation's interest rates on loans and money supply by creating a seven member board (Danzer et al. 675).(Ask about same source different page citing) Franklin Roosevelt also helped stabilize the banks by restoring the people's hope in them. Roosevelt once broadcasted that “Hoarding was now out of style.” (??)

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Linda Alchin says that the Panic of 1837 was a “crisis in financial and economical conditions in the nation following changes in the banking system.” Andrew Jackson thought that the bank had too much power and economical and political influence on the people(The Andrew Jackson Top 10 List). Of course the bank would have some influence and power, it’s a bank... Destroying the national bank was a bad move on Jackson, making profits,prices, and wages go down as unemployment goes up so says Linda Alchin. The writer of u-s-history.com says that ,”banks throughout the country failed;mortgages were foreclosed, forcing people out of their homes and off their farms.”

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Beginning with bank reform, the New Dealers were able to maintain oversight in the banking industry, which had previously been an unregulated and unpredictable source of capital. The Glass-Steagal Act and the Emergency Banking Act signaled a shift from a lassiez faire approach to the banking industry to one that ensured banks were making responsible loans and not gambling with depositor’s savings in the stock market. By not allowing banks who were considered “irresponsible’ to reopen and separating the savings and investment functions of the banks, a more secure system began to emerge. The impact of this legislation was immediate, as bank failures dropped dramatically. Additionally, major breakdowns in the banking industry were avoided until fairly recently, which came as a result of the repeal of Glass-Steagal.

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According to FDIC.gov “An average of more than 600 banks per year failed between 1921 and 1929”. This led to millions of people losing the money they put into bank accounts, for some it was their entire life’s saving. It was this lack of security in deposits that led to the establishment of the FDIC (Federal Deposit Insurance Corporation). This program let the public have security when investing money in the banks by having bank deposits insured, not only was the FDIC successful in the 1930’s but it is also hugely successful today, almost every bank in America is FDIC insured.

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FDR came up with a plan to put faith back into the banking system as well as insure the customer’s money was going to be their when they needed it. This program was called the FDIC “President Roosevelt signs this act on June 16, 1933, to raise the confidence of the U.S. public in the banking system by alleviating the disruptions caused by bank failures and bank runs. From 1929 to 1933, bank failures resulted in losses to depositors of about $1.3 billion. Before the FDIC was in operation, large-scale cash demands of fearful depositors often struck the fatal blow to banks that might otherwise have survived. Since the FDIC went into operation, bank runs no longer constitute a threat to the banking industry.”

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Nicholas Biddle in turn, started calling in loans and collecting debts. There was concern by the people on the state of the economy and the impact that this could have on people’s finances and businesses. President Jackson did not relinquish his efforts in closing the bank and was successful in doing so, however the people were not unjustified in their concerns. Biddle’s calling in loans put the nation in an economic depression. Even today banking powers continue to be of concern.

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The "roaring" 20's allowed the banks to make a lot of money, so they invested it in expanding the business. When the economic prosperity of the 1920's was flooded with all the stocks people were buying, the system didn't have enough money in it to continue. It was only a matter of time before total economy failure, the stock market crash just sped it up. Everyone went to the banks for their money so they could pay their debts, but the citizens didn't know the banks used the people's money for investments, and lost all the money in the stock market crash. One by one the banks began to fail.

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