The Savings and Loan Crisis of the Early 1990s Was

question 16

Multiple Choice

The savings and loan crisis of the early 1990s was caused by a moral-hazard problem because:

• A) government insurance encouraged bank managers to take on more risk than they would have without such insurance.
• B) bank managers no longer attempted to maximize the profits of the firm.
• C) insurance attracted depositors who would not have used banks otherwise.
• D) depositors had more information about the banks than shareholders had.
• E) government insurance encouraged bank managers to take on less risk than they would have without such insurance.

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