Savings and Loan Crisis - Financial Institutions Reform, Recovery and Enforcement Act of 1989

Financial Institutions Reform, Recovery and Enforcement Act of 1989

As a result of the savings and loan crisis, Congress passed the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) which dramatically changed the savings and loan industry and its federal regulation. The highlights of the legislation, signed into law August 9, 1989, were:

1. The Federal Home Loan Bank Board (FHLBB) and the Federal Savings and Loan Insurance Corporation (FSLIC) were abolished.
2. The Office of Thrift Supervision (OTS), a bureau of the United States Treasury Department, was created to charter, regulate, examine, and supervise savings institutions.
3. The Federal Housing Finance Board (FHFB) was created as an independent agency to replace the FHLBB, i.e. to oversee the 12 Federal Home Loan Banks (also called district banks) that represent the largest collective source of home mortgage and community credit in the United States.
4. The Savings Association Insurance Fund (SAIF) replaced the FSLIC as an ongoing insurance fund for thrift institutions (like the FDIC, the FSLIC was a permanent corporation that insured savings and loan accounts up to $100,000). SAIF is administered by the Federal Deposit Insurance Corp.
5. The Resolution Trust Corporation (RTC) was established to dispose of failed thrift institutions taken over by regulators after January 1, 1989. The RTC will make insured deposits at those institutions available to their customers.
6. FIRREA gives both Freddie Mac and Fannie Mae additional responsibility to support mortgages for low- and moderate-income families.