It should be a deeply sobering thought for Americans that the U.S. housing finance sector has collapsed twice in the last three decades. Of course, we know that there was the painful shriveling of the huge U.S. housing and mortgage bubble of the 2000s, but only twenty years before there was the mass failure of the savings and loan (thrift) industry, up to then the dominant mortgage lenders, first from interest rate risk and then from bad loans. That resulted in the failure of the government’s savings and loan deposit insurance fund, which required a $150 billion taxpayer bailout. The bonds sold in 1990 to finance that bailout run to 2030, so the taxpayers will be paying for the 1980s bailout for 15 more years from now! Does the U.S. as a nation have a natural ineptitude for housing finance? Moreover, the savings and loan crisis was mixed together with a severe commercial banking crisis.
Here’s a financial history quiz: How many U.S. thrift institutions and commercial banks do you think failed or had to get government assistance in the 1980s crisis? Before you read the answer, what’s your number?Posted: Feb 27, 2015