In the 1980s and early 1990s, about one-third of the more than 3,000 savings and loan associations in the U.S. failed, creating a financial crisis in the process since so much of their business was related to mortgages. In fact, 4,000 S&Ls held about half of the outstanding home mortgages in 1980 (around $480 billion; total assets held by the S&Ls was $600 billion), according to Kenneth J. Robinson’s essay on the crisis at the Federal Reserve History website.

Thanks to stress on the wider financial markets due to rising inflation and interest rates, S&Ls faced steep losses. The federal government and many states responded at first with deregulation, but this only served to spark growth in the S&L industry. According to Robinson,

From 1982 to 1985, thrift industry assets grew 56 percent, more than twice the 24 percent rate observed at banks. This growth was fueled by an influx of deposits as zombie thrifts began paying higher and higher rates to attract funds. These zombies were engaging in a “go for broke” strategy of investing in riskier and riskier projects, hoping they would pay off in higher returns. If these returns didn’t materialize, then it was taxpayers who would ultimately foot the bill, since the zombies were already insolvent and the FSLIC’s resources were insufficient to cover losses.

Congress eventually stepped in, passing the Financial Institutions Reform, Recovery and Enforcement Act of 1989. The crisis is estimated to have cost taxpayers about $132 billion, although ProPublica says that cost is closer to $180 million.