The problems suffered by Utah's savings and loans had their genesis in the 1970s, reached the crisis stage a few years ago, and now the federal government is finally taking steps to clean up the mess.

Interest rates and inflation are the culprits that started the ball of troubles rolling in the 1970s, according to most thrift owners and regulators. Savings and loans made their money on low interest, long-term mortgages. But at the same time, competitive forces and inflation were forcing S&Ls to pay higher and higher rates to attract deposits. In short, many S&Ls ended up spending more than what they earned by the late 1970s.Savings and loans nationwide saw the profit-spread problem coming in 1970 and pleaded with Congress to make regulatory changes to avoid a crisis. But repeated requests fell on deaf ears until 1980, when federal legislation finally allowed S&Ls to diversify outside their traditional mortgage lending business into consumer and commercial lending.

Already in a crisis stage and desperate to reverse losses, many Utah S&Ls plunged into the newly permitted areas of lending, unaware and inexperienced to handle the potential pitfalls.

"Savings and loans used the mentality of lending to a home owner when they financed a commercial development," said John L. Richards, president of MountainWest Savings, now insolvent and under federal receivership.

"We needed to look at the management capacity of a borrower and not just collateral."

MountainWest lost its money on commercial developments in southern California. Although the California economy was booming, Richards said the borrowers were "flaky" and many are now hiding behind bankruptcy laws to protect the inflated equity in their still undeveloped properties.

Meanwhile, those S&Ls that invested in Utah experienced a downturn in the local economy that further exacerbated the poor judgment on the part of S&L managers by investing in large-scale, ill-conceived developments. Noted flops financed in large part by savings and loans include American Towers and Governor's Plaza in Salt Lake; Sherwood Hills resort near Brigham City; Brian Head Hotel in southern Utah; and the overbuilt Park City condominium market.

The industry has paid the price. While depositors have remained protected and insulated from losses, savings and loans have suffered eight consecutive years of losses, and owners of State Savings, Summit Savings, Deseret Federal Savings, American Savings and MountainWest have had to walk away from their investments and turn their institutions over to federal regulators.

Only the State Savings failure has resulted in charges of fraud on the part of its former owner, J. William Oldenburg. Living in San Francisco, he faces a a 42-year prison term if convicted on charges he defrauded State Savings of $26.5 million in a 1984 California real estate deal.

After the Oldenburg affair, State Savings was acquired by Sandia Federal Savings. But Sandia has experienced heavy losses and is now part of the current joint regulatory oversight program set up by President George Bush to stem losses nationwide until a permanent cure for insolvent savings institutions is found.

Also placed under the program this month were Deseret Federal, MountainWest and American Savings. Bank and thrift examiners will oversee daily operations of the troubled thrifts and consider viable buyers.