When will we learn?

Pop Quiz the following is a title to a paragraph from a wiki article, I want you to guess which one.

Imprudent real estate lending

No, not the current mortgage mess we are in now. It comes from the S&L crisis article

In an effort to take advantage of the real estate boom (outstanding US mortgage loans: 1976 $700 billion; 1980 $1.2 trillion) and high interest rates of the late 1970s and early 1980s, many S&Ls lent far more money than was prudent, and to risky ventures which many S&Ls were not qualified to assess. "The banking problems of the '80s and '90s came primarily, but not exclusively, from unsound real estate lending."

DOH!

Sound familiar?

This isn't the first time we have been in this mess but hopefully we can learn from this mistake.

From 1986 to 1995, the number of US federally insured savings and loans in the United States declined from 3,234 to 1,645. This was primarily, but not exclusively, due to unsound real estate lending.

The market share of S&Ls for single family mortgage loans went from 53% in 1975 to 30% in 1990. U.S. General Accounting Office estimated cost of the crisis to around USD $160.1 billion, about $124.6 billion of which was directly paid for by the U.S. government from 1986 to 1996.

The concomitant slowdown in the finance industry and the real estate market may have been a contributing cause of the 1990–1991 economic recession. Between 1986 and 1991, the number of new homes constructed dropped from 1.8 to 1 million, the lowest rate since World War II.

Some commentators *raising my hand* believe that a taxpayer-funded government bailout related to mortgages during the savings and loan crisis may have created a moral hazard and acted as encouragement to lenders to make similar higher risk loans during the 2007 subprime mortgage financial crisis.

DOUBLE DOH!