LEARNING FROM THE PAST
About 82% of the bank failures were of banks with
less than $100,000 in capital. From 1866 to 1932,
there were 150 proposals in the USA Congress.
These were intended to create “Deposit Insurance”
to protect depositors during periods of crisis, but
Congress didn’t agree to do so until 1933. The key
lessons learned from this period were:
• Capital requirements for banks were
nonexistent and inadequate.
• There were no federal bank regulations,
enforcements, or standards of care.
• There was no deposit insurance to protect
depositors, causing panics and “runs.”
•
party did not value loan collateral.
The USA applied the lessons learned from this
period by:
• Founding of (AIREA) Appraisal Institute in 1932
so collateral is valued by Appraisers.
Founding the FDIC in 1933, establishing
deposit insurance, capital, and bank
regulations.
28 | APPRAISAL BUZZ FALL 2020
S&L Crisis of 1980-1995:
institutions, with total assets of $924 billion, failed
over a 15-year period. Of those, during the last
six-year period of 1989 to 1995, there were 747
that were managed by the Resolution Trust
Corporation (RTC). To put this in perspective, the
amount of loans managed by the RTC were 2.5
times the $162 billion in Citibank loans, the world’s
largest bank. During the worst of the crisis, loans and
foreclosed properties could not be sold at any price
the RTC adopted as its mission, “Restoring the
above $50,000 (later $100,000), resulting in $170
million in appraisal fees paid to independent
appraisers from 1990 to 1994. By inventing a
securitization and portfolio sale process for
non-performing loans, the RTC helped to improve
liquidity for all banks, then and now. They would do
this by showing that distressed loans can be sold,
provided the underlying collateral is valued
appraisers (required in order to regain market
Lessons learned include:
• The relaxation of lending regulations fueled an
explosion in speculative construction.
• To improve accountability, lenders required to
utilize licensed appraisers.
• To improve consistency in Standards of Care,
the U.S. Congress authorized the Appraisal
appraisal standards.
subsequent crisis from 2008-2010 led to
bank capital requirements.
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• A subsequent
increased bank