Financial Institutions Reform, Recovery, and Enforcement Act

(FIRREA) A federal law passed in 1989 in response to the savings and loan crisis of the 1980s that restructured the regulatory and deposit insurance program for dealing with S&Ls and changed the rules under which federally-regulated S&Ls operate. See Federal Housing Finance Board, Office of Thrift Supervision, Resolution Trust Corporation. Example: The FIRREA was intended to address the major problem of failing S&Ls due to mounting nonperforming loans held in portfolio, as well as to make reforms that would prevent the problem from retuning. Often referred to as the “S&L bailout.” the law represents a large expenditure of federal funds to pay off depositors at failed associations. The law also created the Resolution Trust Corporation. which is charged with managing and liquidating the assets of associations seized by the government. The Federal Savings and Loan Insurance Corporation was abolished by the law. and its insurance and regulatory responsibilities were brought under the Federal Deposit Insurance Corporation, which also insures commercial banks.