Question

1. Managers of insolvent thrift institutions were encouraged to take excessive risk in the mid-1980’s because:

1. The FSLIC insurance fund was depleted
2. Their institution could not be closed so the managers jobs were safe, temporarily
3. Congress at this time wanted S&L’s to be more aggressive in competing with banks(class slide)
4. Both a & b above

Answer 1

1. We see that the managers of insolvent thrift institutions were encouraged to take excessive risk in the mid-1980’s because The FSLIC insurance fund was depleted