The U.S. savings and loan debacle is, or should be, of great interest to political scientists. Any public policy failure as costly as this one deserves study for that reason alone. Analysis of its origins and development may reveal why it has been so intractable. Such analysis also may illuminate a broader class of regulatory policy problems that the political process tends to manage poorly.

Most writing about the savings and loan crisis has focused on its proximate causes. The deeper political roots of the thrift debacle have not been identified. As someone who has tracked the development of the thrift crisis and analyzed deposit insurance issues since 1986, I am convinced that the problems have a deeper structure, rooted in the organization of the U.S. political/regulatory system and its interaction with private markets. More specifically, the potential for this disaster was inherent in the original 1930s' design of deposit insurance and its associated regulatory policies. At this level of analysis, the challenge to policymakers posed by the thrift disaster can be appreciated and its similarities or differences with other regulatory problems examined.