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FDIC Enforcement - Bank Failures 1980s-1994

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Mike Kennedy

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Sep 28, 2003
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Certified Residential Appraiser
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New York
http://www.FDIC.gov/bank/historical/history/421_476.pdf


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Introduction​

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The 1980s and early 1990s were undoubtedly a period of greater stress and turmoil for
U.S. financial institutions than any other since the Great Depression.

Over this period more than 1,600 commercial and savings banks insured by the FDIC were closed or received FDIC financial assistance. As a consequence, the bank regulatory system came under intense scrutiny, and fundamental questions were raised about its effectiveness in anticipating and limiting the number of bank failures and losses to the deposit insurance fund.

Effective supervision can be achieved in two ways: (1) problems can be recognized
early, so that corrective measures can be taken and the bank returned to a healthy condition;

(2) supervision can limit losses by closely monitoring troubled institutions, limiting their
incentives to take excessive risks, and ensuring their prompt closure when they become insolvent or when their capital falls below some critical level.

This chapter reviews and analyzes the bank supervisory system during the 1980s and
early 1990s by focusing principally upon bank examination and enforcement polices.
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Karl

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Jan 15, 2002
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Arizona
And to think that was supposedly a crisis!! He!! that was just a accounting error compared to todays standards.
 

Restrain

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Jan 22, 2002
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Certified General Appraiser
State
Florida
At that time, national banks just didn't exist. Every bank was free standing. For example, in Texas, a bank had to have it's headquarters in Texas and could only have branches in Texas...and they were limited in number and distance from the main office.

The big national banks got their start out of that collapse. BofA bought a bunch of old S&Ls, failed banks across the southwest. NCNB bought a bunch of failed S&Ls and banks throughout the southeast. Wells Fargo bought a bunch of small banks and failed S&Ls. Then there were mergers. NCNB bought BofA and took the name, etc.

That's why you're not seeing high numbers of small bank failues, but, instead, humongous bank failures that threaten the entire economy. Too concentrated financial insitutitions.
 
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