The S&L Crisis in the Late 1970s and Early 1980s

question 52

Multiple Choice

The S&L crisis in the late 1970s and early 1980s was made much worse by

• A)moral hazard, when regulators failed to close bankrupt S&Ls, which in turn caused a credit crunch.
• B)adverse selection, when commercial banks were allowed to buy financially sound S&Ls but did not buy bankrupt S&Ls.
• C)asymmetric information, because the government did not realize the bad financial condition of the S&Ls.
• D)the regulatory dialectic.

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Definitions:

Deference

The act of submitting to the wishes, judgment, or opinion of another person out of respect or reverence.

Embarrassing Oneself

The act of causing oneself to feel awkward, self-conscious, or ashamed in public or social situations.

Social Anxiety Disorder

A chronic mental health condition characterized by overwhelming anxiety and self-consciousness in everyday social situations.

Phobia

An intense, irrational fear of, or aversion to, specific objects, activities, or situations.