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Onward, a Fundrise Production

25: The Big Bang: The origin of modern real estate and banking

Aug 18, 2023
Learn about the origins and collapse of the Savings and Loan Crisis in the late 1970s, and how it shaped our modern financial system. Discover the lessons learned from this crisis and the 2008 financial crisis. Explore the rebirth of the real estate industry and the rise of private credit funds as alternatives to traditional bank credit. Gain insights into the potential impact of technology and AI on the banking system. Uncover the importance of understanding history to predict future outcomes.
58:23
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Quick takeaways

  • The Savings and Loan crisis highlighted the importance of proper regulation and government oversight, with lessons learned including stricter standards for capital, stress testing, and risk management to avoid future financial crises.
  • The Savings and Loan crisis led to a transformation in the banking and real estate industries, giving rise to real estate private equity, public REITs, nationwide banking, and other changes that reshaped the financial landscape.

Deep dives

Lessons from the Savings and Loan Crisis

The Savings and Loan (SNL) crisis in the 1980s had a significant impact on the banking and real estate industries, ultimately leading to their rebirth and reshaping the financial landscape. One key lesson is the importance of proper regulation and government oversight. While regulators in the 1980s failed to enforce capital standards and allowed SNLs to take on risky investments, lessons have been learned, and regulators today have stricter standards for capital, stress testing, and risk management. Another lesson is the need to recognize the systemic and compounding nature of financial downturns. Just as the boom and bust cycles in the SNL crisis fed on themselves and worsened the crisis, the same pattern can occur in the future. Additionally, the crisis birthed a new era of banking and real estate. Modern banking as we know it now, with national banks engaged in various types of lending, did not exist before the crisis. The real estate industry experienced a rebirth, giving rise to real estate private equity, private credit funds, public REITs, and more. These changes highlight the potential for continued evolution and disruption in the financial industry. Finally, there is a need for continued vigilance and lessons about avoiding industry capture. The influence of lobbyists and the desire to avoid government bailouts led regulators and policymakers to make negligent decisions during the SNL crisis. Though regulators have since improved, industry capture remains a risk that needs to be addressed to ensure the stability and integrity of the financial system.

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