A . Explain how the existence of the Federal Savings and Loan Insurance Corporation (FSLIC) may unintentionally have increased the number of S&L failures in the 1980s and 1990s. b. What safeguards can help prevent this from happening?
a . The existence of FSLIC (the government-created program to provide insurance to S&L depositors)
may have contributed to the demise of many S&Ls, because with the guarantee of deposits S&Ls had
less incentive to safeguard their own activities. This is an example of moral hazard.
b. Bank audits and examinations are the safeguards that help prevent bank failure. If weaknesses in
operations are detected early enough, serious damage can be avoided.
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The desire to smooth consumption is reflected in
A) the consumer's budget constraint. B) the curvature in a consumer's indifference curves. C) choice between present and future. D) the production possibilities frontier.
Using the specific factors model, assume that strawberry production requires the specific factor of land, tractor production requires the specific factor of capital, and labor is variable. If the United States is capital abundant compared to Mexico, and Mexico is land abundant compared to the United States, then in the short run with trade we would expect
A) the income of U.S. land owners to increase. B) the income of U.S. workers to increase. C) the income of Mexican workers to increase. D) the income of Mexican land owners to increase.