The US savings and loan industry thrived over the 150 years following its inception in the 1830s, using depositors’ savings to fund homebuyers’ mortgages at lower costs than banks. The model unravelled in the ‘70s and ‘80s as high inflation and interest rates chipped away at S&Ls’ profitability, until some became bankrupt—even criminal.
History of Financial Crises
Stock markets have experienced many ups and downs, but October 1929’s Wall Street stock market crash continues to hold the title for the most devastating collapse, leading to massive losses and ultimately to the Great Depression. Analysts continue to study the complicated chain of events leading up to it. Could history repeat itself?
WorldCom’s accounting scandal is a riches-to-rags story. Until its demise in mid-2002, WorldCom was regarded as the second-largest long-distance US telecommunications company. Although changing market conditions contributed to its profitability slide, its executives’ deliberate “cooking” of its books led to bankruptcy and prosecution.
Bernard Madoff, whose long-running Ponzi scheme raked in billions but was upended by the Great Recession, left a trail of suffering investors but also inspired the SEC to initiate reforms to ensure it never happened again. The mystery is how he managed to pull off his clandestine shenanigans for as long as he did without being detected.