The Dialectics of State Economic Intervention: Bank Deregulation and the Savings and Loan Bailout

Abstract

Much research has been devoted to analyses of the factors that influence the creation and implementation of state policy. Conventional theories of the state suggest interesting frameworks for understanding the savings and loan bailout legislation. However, they are limited because they have stalled in a debate predicated on the presumption of theoretically mutual exclusivity. While an increasing number of observers have begun to call for a synthesis, there remains a need to specify the contours of such a synthesis.Of great use here to organize a synthesis of state theories is Jessop's (1990) concepts of state projects and balance of class forces as a frame for analyzing the savings and loan bailout. We use these concepts as mechanisms for exploring the conditions under which the factors identified by each of the state theories become more or less salient in explaining the production and implementation of state policy. Moreover, these synthesizing concepts facilitate an explication of the varying levels of power implied by state theories: who govems, who wins, and who benefits from policy, and under what conditions are these levels of power invoked? We focus here on the legislation for bailing out the savings and loan industry in 1989. An examination of that policy reveals that the industry itself was created as part of a larger state project to correct for contradictions in the economy that produced the Great Depression. The industry's 1980s crisis was created by a combination of the very regulations that created the special protected niche of the thrifts, Federal Reserve Board policy restricting the money supply in an effort to control inflation, and the deregulation of banking that unleashed economic forces contradicting the original mission and undermining the already precarious financial stability of the savings and loan industry. Although both capital accumulation and nonaccumulation interests received attention in the legislation, only accumulation interests actually benefited in its implementation. The savings and loan bailout was thus not a singular, isolated policy responding to a crisis but rather part of a broader dialectic process of state economic intervention, organized and implemented through state projects and informed by processes affecting the balance of class forces.