13. Recent financial crises Aa Aa Which of the following is not true of the savi

Question

13. Recent financial crises Aa Aa Which of the following is not true of the savings and loan (S&L;) crisis of the 1980s? O When Congress eased regulations to allow S&Ls; to engage in riskier investments, it simultaneously subjected them to stricter regulation. Closure of failed S&Ls; cost U.S. taxpayers more than $124 billion O The S&Ls; took on excessive risk in real estate lending during the boom that occurred in the sector during the 1970s and 1980s. O The crisis played a significant role in causing steep slowdowns in the real estate and financial sectors During a vicious cycle of deleveraging , which causes more fear and depositor withdrawals because banks hold limited amounts of cash increased home prices and further demand for home loans from subprime homebuyers more price declines and further asset selling

Explanation / Answer

Which of the following is not true of the savings and loan (S&L) crisis of 1980a?

* When Congress eased regulations to allow S&Ls to engage in riskier investments, it simultaneously subjected them to stricter regulation.

During a vicious cycle of deleveraging:

More fear and depositor withdrawals because banks hold limited amount of cash which causes more price declined and further asset selling

During a vicious cycle of deleveraging:

More loans are made to buyers who do not meet standard loan criteria, which causes declining asset prices force borrowing to sell assets.

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