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“Yes Virginia, there is trouble in the Savings and Loan Industry.” Depending upon who one believes, the cost of restructuring and creating a vital thrift industry will be between $50 billion and $100 billion. Nevertheless, political concerns virtually guarantee that the industry which has helped make the American dream a reality will be nurtured (force fed if necessary) back to good health. As the savings and loan industry is rehabilitated, bankers can be expected to increasingly assert that thrift institutions represent a major factor in their markets. Both Federal and State bank regulators will be called upon to place more weight on the presence of thrift deposits in their markets when analyzing the effect on competition from a proposed merger. Further, the inevitable “shake-out” in the thrift industry will increase concentration in some financial markets and necessitate careful consideration in competition analysis by bank regulators.


This paper was written in 1988 and presented in the 1989 Annual Meeting of the Virginia Association of Economists in Charlottesville, Virginia.

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