savings and loan

The savings and loan crisis 19 years ago may be instructive for those managing the new $700 billion bailout.

The nation’s largest savings and loan agreed to sell assets to J.P. Morgan Chase in a government-brokered deal to rescue the troubled bank, according to people briefed on the deal.

The turmoil on Wall Street is prompting a key congressional Democrat to consider a broad federal market rescue that could include creating a new government entity to take over collapsed financial institutions and sell off their assets, as lawmakers did during the 1980s savings and loan crisis.

The country’s biggest savings and loan watched its stock fall to under $3 a share, signaling that the company’s recent executive shake-up may not have been enough to placate anxious investors.

Facing a growing credit crisis and a rising number of troubled banks, the F.D.I.C. has recruited back many of the people who helped it clean up the savings and loan crisis 20 years ago.

Washington Mutual Inc. said Tuesday it lost a staggering $3 billion during the second quarter as the nation's largest savings and loan increased its loss reserves to more than $8 billion to cover souring loans in its mortgage portfolio.

Credit rating agency Standard & Poor's recently placed an estimated price tag on this worst case scenario -- $420 billion to $1.1 trillion of taxpayer's money.

This dwarfs how much it cost to help banks during the savings and loan crisis of the late 1980's and early 1990's.

The U.S. savings and loan crisis of the 1980s ended up costing taxpayers 3.2 percent of G.D.P., the equivalent of $450 billion today.

Some estimates put the fiscal cost of Japan's post-bubble cleanup at more than 20 percent of G.D.P.