"Understanding the Savings and Loan Crisis
Restrictions placed on S&Ls at their creation via the Federal Home Loan Bank Act of 1932—such as caps on interest rates on deposits and loans—greatly limited the ability of S&Ls to compete with other lenders as the economy slowed and inflation took hold. For instance, as savers piled money into newly created money market funds in the early 1980s, S&Ls could not compete with traditional banks due to their lending restrictions.

Add in a recession—sparked by high-interest rates set by the Fed in an effort to end double-digit inflation—the S&Ls were left with little more than an ever-dwindling portfolio of low-interest mortgage loans. Their revenue stream had become severely tightened.

By 1982, the fortunes of S&Ls had turned. They were losing as much as $4.1 billion per year after having turned a healthy profit in 1980."



Source: Investopedia