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A tale of two crises: Germany’s Landesbanken and the United States’ savings and loans

Mark K Cassell

Journal of Banking Regulation, 2016, vol. 17, issue 1-2, 73-89

Abstract: This research compares the experiences of financial institutions in two very different financial crises: savings and loan institutions (S&Ls) in the United States during the 1980s and Germany’s state-owned banks, known as Landesbanken, during the global recession of 2007–2008. While much of the research on bank failures centers on the choices made by public and private actors according to their interests, this research focuses on the relationship between the ideas that drive an economic entity and the institutions that hold the economic entity accountable. The article argues that while the crises were very different, there is a causal thread that connects the two. Landesbanken and the S&Ls experienced a similar disruption in the complementarity between their original mission and their regulatory framework. The disruption contributed to increased volatility, weak oversight, and greater dependence on third parties and bank managers for risk information.

Date: 2016
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Handle: RePEc:pal:jbkreg:v:17:y:2016:i:1-2:p:73-89