FSLIC stands for Federal Savings and Loan Insurance Corporation. It was a United States government agency that operated from 1934 to 1989. FSLIC was established as part of the New Deal in response to the Great Depression, with the primary aim of insuring deposits of savings and loan associations (S&Ls) to promote stability and confidence in the financial system.
The FSLIC's main function was to provide deposit insurance to S&L institutions, similar to how the Federal Deposit Insurance Corporation (FDIC) insured commercial banks. This insurance ensured that if an S&L failed, the FSLIC would step in and reimburse depositors up to a certain amount, typically $100,000, for their losses. By providing this safety net, the FSLIC aimed to prevent bank runs and maintain public trust in S&Ls.
In addition to deposit insurance, the FSLIC had regulatory powers over S&Ls. It supervised and examined these institutions to ensure compliance with federal regulations and financial soundness. The FSLIC also had the authority to assist troubled S&Ls by providing financial assistance or arranging mergers.
However, due to mismanagement, fraud, and risky lending practices, the S&L industry faced a crisis in the 1980s. Many S&Ls became insolvent, leading to a significant burden on the FSLIC. Eventually, the FSLIC itself became financially unstable, prompting the government to create a new agency, the Resolution Trust Corporation (RTC), in 1989. The RTC took over the responsibilities of the FSLIC and managed the resolution of failed S&Ls.
