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Published online by Cambridge University Press: 02 September 2013
As the taxpayers' bill for the cost of the savings and loan debacle continues to increase—recent estimates suggest total costs of about $500 billion—and the insurance fund for the nations' banks runs close to empty, many people are asking how and why we got here, and where is the accountability for such a disaster? What was the government doing while all of this was happening? While much has been written about who should be blamed and the lessons learned from this crisis, it is important for those of us in government to evaluate our contributions to the analysis of this issue and examine what we have learned.
As an evaluator of the General Accounting Office (GAO), Congress' “watchdog” agency, I will focus on GAO's evolving role in the analysis of the savings and loan crisis. GAO combines the expertise of accountants, economists, and analysts familiar with the internal operations of the federal agencies to provide a unique and comprehensive analysis of major policy issues. The S&L issue is a particularly useful case study for GAO because it illustrates the dramatic growth in our expertise and ability to contribute to policy analysis over the last decade. In 1980 GAO issued no reports relating to the thrift industry, while in 1989 GAO issued 28 reports and testimonies specifically about thrifts.
The opinions expressed in this paper are solely those of the author and do not represent official GAO positions.
1. See the GAO Review, Vol. 17, Issue 1, Winter 1982, pp. 36–38, for a discussion of GAO's initiation of financial regulatory audits.
2. See GAO's report, Formal Supervisory Process for Savings and Loan Associations Should Be Strengthened, GGD-81–91, September 17, 1981.Google Scholar
3. See GAO's report, The FSLIC Insurance Fund—Recent Management and Outlook for the Future, GAO/GGD-84–3, October 14, 1983.Google Scholar
4. See GAO's testimony, Changes in the Financial Services Industry and Their Impact on Federal Regulation, before the Senate Committee on Banking, Housing, and Urban Affairs, June 16, 1983.Google Scholar
5. See GAO's report, Thrift Industry Restructuring and the Net Worth Certificate Program, GAO/GGD-85–79, September 24, 1985.Google Scholar
6. See GAO's testimony, GAO's 1984 Financial Audits of the FDIC and FSLIC, before the Subcommittee on Financial Institutions, House Banking Committee, September 12, 1985.Google Scholar
7. See GAO's report, Thrift Industry Problems: Potential Demands on the FSLIC Insurance Fund, GAO/GGD-86–48BR, February 1986.Google Scholar
8. See GAO's report, Thrift Industry: Cost to FSLIC of Delaying Action on Insolvent Savings Institutions, GAO/GGD-86–112BR, September 1986.Google Scholar
9. See GAO's testimony, Problems in Reporting by Depository Institutions, before the Subcommittee on Oversight and Investigations, House Energy and Commerce Committee, April 10, 1986.Google Scholar
10. See GAO's reports, Thrift Industry: Forbearance for Troubled Institutions, GAO/GGD-87–78BR, May 7, 1987 Google Scholar, and Thrift Industry: The Management Consignment Program, GAO/GGD-87–115BR, September 10, 1987.
11. See GAO's testimony, The Federal Savings and Loan Insurance Corporation—Financial Condition and Recapitalization Issues, before the House Banking Committee, T-AFMD-87–4, March 3, 1987 Google Scholar, and GAO's report, Thrift Industry: The Treasury/Federal Home Loan Bank Board Plan for FSLIC Recapitalization, GAO/GGD-87–46BR, March 3, 1987.Google Scholar
12. These views were contained in a letter dated March 6, 1987 from William B. O'Connell, President of the U.S. League of Savings Institutions, to GAO's Comptroller General.
13. See GAO's report, Financial Audit: Federal Savings and Loan Insurance Corporation's 1986 and 1985 Financial Statements, GAO/AFMD-87–41, May 27, 1987.Google Scholar
14. See GAO's report, Financial Audit: Federal Savings and Loan Insurance Corporation's 1987 and 1986 Financial Statements, GAO/AFMD-88–58, July 5, 1988.Google Scholar
15. See GAO's testimony, The Federal Savings and Loan Insurance Corporation—Current Financial Condition and Outlook, before the Senate Committee on Banking, Housing and Urban Affairs, T-AFMD-88–12, May 19, 1988.Google Scholar
16. See GAO's testimonies, Failed Financial Institutions: Reasons, Costs, Remedies and Unresolved Issues, before the House Banking Committee, GAO/T-AFMD-89–1, January 13, 1989 Google Scholar; Resolving the Savings and Loan Crisis, before the House Budget Committee, GAO/T-GGD-89–3, January 26, 1989; and before the Senate Banking Committee, GAO/T-GGD-89–4, February 2, 1989.
17. See GAO's report, Troubled Financial Institutions: Solutions to the Thrift Industry Problem, GAO/GGD-89–47, February 21, 1989.Google Scholar
18. See GAO's testimonies, The Need to Improve Auditing in the Savings and Loan Industry, before the House Banking Committee, GAO/T-AFMD-889–2, February 21, 1989 Google Scholar; and Failed Thrifts: Internal Control Weaknesses Create an Environment Conducive to Fraud, Insider Abuse, and Related Unsafe Practices, before the Criminal Justice Subcommittee of the House Judiciary Committee, GAO/T-AFMD-89–4, March 22, 1989.
19. See GAO's report, Thrift Failures: Costly Failures Resulted from Regulatory Violations and Unsafe Practices, GAO/AFMD-89–62, June 16, 1989.Google Scholar
20. See GAO's report, CPA Audit Quality: Failures of CPA Audits to Identify and Report Significant Savings and Loan Problems, GAO/AFMD-89–45, February 2, 1989.Google Scholar
21. See GAO's testimony, The Federal Savings and Loan Insurance Corporation's Use of Notes and Assistance Guarantees, before the House Banking Committee, GAO/T-AFMD-88–17, September 8, 1988.Google Scholar
22. See GAO's reports, Failed Thrifts: Bank Board's 1988 Texas Resolutions, GAO/GGD-89–59, March 11, 1989 Google Scholar, and Failed Thrifts: FDIC Oversight of 1988 Deals Needs Improvement, GAO/GGD-90–93, July 19, 1990.
23. See GAO's report, Deposit Insurance: A Strategy for Reform, GAO/GGD-91–26, March 4, 1991.Google Scholar
24. See GAO's report, Thrifts and Housing Finance: Implications of a Stricter Qualified Thrift Lender Test, GAO/GGD-91–24, April 30, 1991.Google Scholar