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Organizations and Fraud in the Savings and Loan Industry

NCJ Number
Social Forces Volume: 73 Issue: 4 Dated: (June 1995) Pages: 1439-1463
Date Published
25 pages

In analyzing organizational correlates of fraud in the savings and loan industry, the authors test the hypothesis that during the 1980s institutions departing from traditional activities of thrifts to embark on high-growth, high-risk strategies were more likely to be vehicles for fraud than institutions retaining a more traditional focus.


Study data were obtained from insolvent savings and loan institutions under the supervision of the Resolution Trust Corporation (RTC) as of May 18, 1992. Because the RTC was not established until 1989, the sample consisted of institutions placed into conservatorship during or after February 1989. Independent study variables were of two types, those describing organizational structure and those describing organizational behavior. Organizational structure variables included ownership type, charter, assets, asset growth, home loans, brokered deposits, direct investments, and net worth. Dependent variables included losses due to fraud, number of referrals, and number of individuals referred. Statistical analysis of data from a sample of 686 insolvent institutions supported the study hypothesis. Stock-owned thrifts, those with a relatively low proportion of home mortgage loans, those with a high proportion of assets in direct investments, and those experiencing high asset growth were vehicles for the most costly and frequent incidents of suspected crime. Certain practices, such as taking in large amounts of brokered deposits and making large numbers of direct investments in a reckless manner, contributed to fraud, particularly since perpetrators were well aware of the consequences of such practices. Findings are related to theoretical issues regarding the role of organizations in white-collar crime. An appendix compares the RTC sample with soon-to-fail thrifts on selected characteristics. 60 references, 13 notes, and 5 tables

Date Published: January 1, 1995