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For the official version of A Brief History of Deposit Insurance in the United States (yes, that's the real title of the 76 page document), see this FDIC pdf.
The Times article is okay as far as it goes, but it seems rather threadbare on mid 20th century history. Here's a good analysis of the S&L crisis. (A much longer paper is provided by the FDIC, and pretty much matches the analysis.)
The Times article makes mention of the S&L's insurer, but doesn't identify it as something other than FDIC. The insurer was of course FSLIC. The analysis I linked to points out that S&Ls were different from banks - they got their money almost exclusively from savings accounts, and lent almost exclusively via fixed rate mortgages. Borrow short, lend long. Lack of ability to diversify geographically or into other forms of loans invited failure when savings rates spiked and the S&Ls had to pay out more for their money than they were earning.
The link further asserts that deregulation of S&Ls was not in the 70s as the Times reports, but in 1980 and 1982. The hope was apparently that this eleventh hour diversification (into more risky investments at the wrong time) would save the industry. I suppose sort of like letting commercial banks get into the investment banking industry (i.e. removing Glass Steagall) was supposed to herald in a golden age of banking.
What neither article points out is that the raising of FDIC limits from $40K to $100K was (at least indirectly) intended to benefit the wealthy. The FDIC history (p. 51, i.e. pdf p. 55) notes that this increase (unlike previous increases) was out of line with inflation, and was designed to stanch the outflow of money from banks. It was not not for the typical depositor. Not unlike the recent program (recently terminated) of providing unlimited coverage for checking accounts, to give businesses a reason to keep their day-to-day cash accounts at the banks.
Reply to @msf: Thanks for linking the actual paper. I thought more people would be interested in the deposit insurance and its history given the Cyprus situation.
Comments
The Times article is okay as far as it goes, but it seems rather threadbare on mid 20th century history. Here's a good analysis of the S&L crisis. (A much longer paper is provided by the FDIC, and pretty much matches the analysis.)
The Times article makes mention of the S&L's insurer, but doesn't identify it as something other than FDIC. The insurer was of course FSLIC. The analysis I linked to points out that S&Ls were different from banks - they got their money almost exclusively from savings accounts, and lent almost exclusively via fixed rate mortgages. Borrow short, lend long. Lack of ability to diversify geographically or into other forms of loans invited failure when savings rates spiked and the S&Ls had to pay out more for their money than they were earning.
The link further asserts that deregulation of S&Ls was not in the 70s as the Times reports, but in 1980 and 1982. The hope was apparently that this eleventh hour diversification (into more risky investments at the wrong time) would save the industry. I suppose sort of like letting commercial banks get into the investment banking industry (i.e. removing Glass Steagall) was supposed to herald in a golden age of banking.
What neither article points out is that the raising of FDIC limits from $40K to $100K was (at least indirectly) intended to benefit the wealthy. The FDIC history (p. 51, i.e. pdf p. 55) notes that this increase (unlike previous increases) was out of line with inflation, and was designed to stanch the outflow of money from banks. It was not not for the typical depositor. Not unlike the recent program (recently terminated) of providing unlimited coverage for checking accounts, to give businesses a reason to keep their day-to-day cash accounts at the banks.