Carter’s Economic Policies Led to Savings and Loan Failure

The nest egg and Loan crisis of the late 1980s and early 1990s cost almost $160 billion, out of which the American taxpayer shouldered in excess of $ great hundred billion in Government bailout measures. The huge budget deficits that resulted can exactly be compared to the current global economic crisis. However, the genesis of the S & L crisis can be traced back to the failed economic policies of President intrude Carter. When respect Carter took over as president in 1979, he inherited an thriftiness in recession. Oil prices were high, unemployment and incomes were low.In order to stimulate the economy, he proposed to increase government spending and introduce tax cuts, but withdrew the former and vetoed the latter(prenominal) when interest strays continued to rise. Instead, when inflation peaked in 1978, the moderate of the Federal Reserve Board, Paul Volcker, initiated policies to tame inflation by lessen the money supply and increasing interest range. However, these mea sures had a negative work and inflation skyrocketed, unemployment reached 11 percent, accompanied by a prime rate of 21. 5 percent (Federal Deposit indemnification Coorporation, 2006).In this climate, the savings and bestow institutions could not survive. They were now confronted with asset-liability-mismatches where the costs they were incurring on short edge funding were higher than the returns they were getting on fixed-rate-mortgages. Additionally, the passage of the Depository Institutions deregulation and Monetary Control Act, introduced risks and opportunities which the S & LS were not pendent to administer. Inevitably, many S & Ls began to go under. In retrospect, Jimmy Carters policies should have focused on lowering interest rates and possibly left the money markets as they were.Read also crumple the Ways in Which British Imperial PoliciesReferencesFederal Deposit Insurance Coorporation (2006, February). The 1970s. Retrieved on July 27, 2009 from http//www.fdic.gov/a bout/learn/learning/when/1970s.html