Home State Savings Bank's Failure

In March 1985, the Home State Savings Bank of Cincinnati collapsed, setting off a series of savings-and-loan closures in Ohio and across the United States of America.

Following the Great Depression, the federal government insured deposits in most banks and savings-and-loan associations. However, many states, including Ohio, allowed the establishment of savings-and-loan organizations that were state-insured. By the early 1980s, many of these savings-and-loan businesses were in trouble from making bad investments, including investing funds in poorly performing stocks, making bad mortgage loans, and loaning poorly performing businesses funds with their depositors' money. In these cases, the savings-and-loan businesses stood to lose much, if not all, of the money deposited in them.

The crisis began in Ohio when investigators discovered that Home State Savings Bank, located in Cincinnati, had invested approximately 140 million dollars in a non-existent securities firm. Numerous depositors flooded the bank, seeking to withdraw all of their savings. To curb the rush upon Home State Savings Bank and to prevent a similar circumstance for other savings-and-loans in the state, Governor Richard F. Celeste declared a banking holiday for any savings-and-loans insured by the state government. He declared this holiday on March 15, 1985, and the banks remained closed until they could secure insurance from the federal government. Some of these banks never reopened, although all depositors eventually received back their money. In the case of the Home State Savings Bank, the Ohio government paid back the depositors their lost funds, costing the state approximately twelve million dollars.

The Home State Savings Bank collapse helped trigger other savings-and-loan closures across the United States. Numerous lending institutions closed, leading the federal and various state governments to repay the banks' depositors. In the end, the savings-and-loan crisis cost American taxpayers billions of dollars.

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