The nation's economy continued to grow in 1989, although at a slightly slower rate than in the preceding five years. Congress also initiated an investigation of the savings and loan industry following the insolvency of many savings and loan institutions as a result of mismanagement or fraudulent practices. In August, 1989, legislation was enacted requiring the federal government to pay more than $150 billion over a period of years to aid foundering savings and loans.
In December, 1989, United States troops invaded Panama, overthrowing the dictatorial government of General Manuel Noriega, who was wanted in the United States on drug-trafficking charges. In early 1990, as a result of political reforms in the Soviet Union and other Communist countries, the Bush administration's foreign policy became more conciliatory toward Eastern Europe.
In August, 1990, the United States was drawn into a crisis in the Middle East, after Iraq invaded and occupied Kuwait. President Bush ordered American armed forces to the Persian Gulf area. When Iraq did not withdraw, the United States in concert with a group of European and Middle Eastern countries attacked Iraq in January, 1991. Within six weeks, the Persian Gulf War ended with the defeat of Iraq. In late 1991, the Soviet Union collapsed and the Cold War ended.
A severe recession, which began in 1991, continued into 1992 and was a major issue in the Presidential election in November, leading to the defeat of President Bush by the Democratic nominee, Governor Bill Clinton of Arkansas.