By the end of the year they had placed, by General Accounting Office estimates, roughly $90 billion in thrift assets in new hands, at a loss to the FSLIC of $38.6 billion. And they were being criticized for their slowness in closing insolvent thrifts, many of which had been allowed to pile up massive losses through fraud and mismanagement.
The FSLIC could ill afford more losses. Despite a rise in premium collections and a special recapitalizing loan arranged by a 1987 Act of Congress, the insurance project was already $75 billion in the red at the end of 1988, according to the GAO. In the end the FSLIC disappeared into a new entity, the Savings Association Insurance Fund, with the special act of Congress that was required to mend the safety net for thrift depositors. The cost of that legislation, the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA),1 has been estimated by the Administration at no less than $166 billion. The cost represents some 20 percent of the insured savings deposits the FSLIC was established to protect.
This article appeared in the May/June 1990 edition of Business Review.