846
Opinion of Souter, J.
four percent of assets in November 1980, see 45 Fed. Reg. 76111, and to three percent in January 1982, see 47 Fed. Reg. 3543; at the same time, the Board developed new "regulatory accounting principles" (RAP) that in many instances replaced generally accepted accounting principles (GAAP) for purposes of determining compliance with its capital requirements.2 According to the House Banking Committee, "[t]he use of various accounting gimmicks and reduced capital standards masked the worsening financial condition of the industry, and the FSLIC, and enabled many weak institutions to continue operating with an increasingly inadequate cushion to absorb future losses." House Report, at 298. The reductions in required capital reserves, moreover, allowed thrifts to grow explosively without increasing their capital base, at the same time deregulation let them expand into new (and often riskier) fields of investment. See Note, Causes of the Savings and Loan Debacle, 59 Ford. L. Rev. S301, S311 (1991); Breeden, supra, at S74-S75.
While the regulators tried to mitigate the squeeze on the thrift industry generally through deregulation, the multitude of already-failed savings and loans confronted FSLIC with deposit insurance liabilities that threatened to exhaust its insurance fund. See Olympic Federal Savings and Loan Assn. v. Director, Office of Thrift Supervision, 732 F. Supp.
2 "Regulatory and statutory accounting gimmicks included permitting thrifts to defer losses from the sale of assets with below market yields; permitting the use of income capital certificates, authorized by Congress, in place of real capital; letting qualifying mutual capital certificates be included as RAP capital; allowing FSLIC members to exclude from liabilities in computing net worth, certain contra-asset accounts, including loans in process, unearned discounts, and deferred fees and credits; and permitting the inclusion of net worth certificates, qualifying subordinated debentures and appraised equity capital as RAP net worth." House Report, at 298. The result of these practices was that "[b]y 1984, the difference between RAP and GAAP net worth at S&L's stood at $9 billion," which meant "that the industry's capital position, or . . . its cushion to absorb losses was overstated by $9 billion." Ibid.
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