In the early 1980s, the supervisory authorities in the US sought ways to enable savings and loans institutions, which were generally in bad shape, to continue in business. The range of activities in which these institutions were permitted to engage was expanded, capital standards were relaxed and the level of deposit insurance was increased.
As a consequence, many savings and loans institutions tried to grow out of their problems by investing in high-risk assets, such as property and so-called ‘junk bonds’. The point is that depositors were content to finance these risky investments, because of the generosity of the US deposit insurance at that time. Moreover, with low capital standards, equity holders or owners had little to lose.