Accounting rules and procedures authorized in the 1980s by the Federal Home Loan Bank Board to assist savings and loan associations with low Net Worth in meeting regulatory capital requirements.
Permissive accounting rules, such as RAP accounting, contributed to the problems of the savings and loan industry, because they allowed many technically insolvent S&Ls to inflate their net worth and stay in business. For example, gains or losses from sales of assets could be amortized over extended periods, contrary to Generally Accepted Accounting Principles (GAAP). In the late 1980s, these undercapitalized S&Ls had to be taken over by the government, contributing to the size of the thrift industry bailout.
RAP accounting was phased out by the Financial Institutions Reform, Recovery and Enforcement Act of 1989, which authorized federal funding to pay depositor claims on the failed S&Ls.
