When regulators chose to allow insolvent S&Ls to continue to operate rather than to close them,they were pursuing a policy of

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Regulatory forbearance refers to the practice of regulators allowing financial institutions to continue operating even when they are technically insolvent in the hopes that they will be able to recover and return to profitability. This was the policy pursued by regulators during the S&L crisis, which many have argued contributed to the severity of the crisis.

When Regulators Chose to Allow Insolvent S&Ls to Continue to Operate