(early 1980s): Tough Interest Rate Environment for Thrifts Persists

Efforts were made during this time to improve the interest rate environment in which banks, and especially thrifts, had to operate, such as the Monetary Control Act of 1980 (see April 1, 1980), and numerous changes in the regulatory frameworks at the state and federal level. Despite all this activity, it remained the case that interest rates on sources of funds to the thrift industry lagged those that could be paid by commercial banks and nonbanks in new vehicles such as money market accounts. The consequence for thrift bankers is that they found it increasingly difficult to keep their businesses supplied with enough funds to sustain a profitable rate of new lending. The industry therefore could not avoid a period of higher than historical failure levels and voluntary mergers and departures from the industry. [Brumbaugh et al., 1987]