Testimony provides a profile of California's thrift industry, discusses the extensive instances of financial institution misconduct uncovered in investigations of S&L failures in the State, and examines the effect of such failures on the thrift industry as a whole. Results of major financial fraud investigations are provided, and types of fraudulent activities involved are described. Factors contributing to financial fraud in S&L's are delineated, including deregulation and expanded powers, provisions of the Federal Right to Privacy Act, lack of independent underwriting of loans, misrepresentation of credit-worthiness, and the ability of those guilty of misconduct to move among financial institutions. Implications of S&L misconducts for the Federal Savings and Loan Insurance Corporation also are discussed. Solutions to the problem are suggested, including improved auditing and monitoring procedures, expanded investigtive and proseccutorial resources, and greater commitment to combatting this form of white-collar crime. Figures.