The Savings & Loan Crisis: AP Macroeconomics Study Guide
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AP Macroeconomics Connections
This crisis is a useful case study in moral hazard: deposit insurance meant thrift depositors had little incentive to scrutinize risky lending, while some thrift owners took on outsized risk knowing losses would ultimately fall on the deposit insurance system rather than themselves. It also illustrates the tradeoffs of financial deregulation.
Key Terms to Know
- Deregulation
- Moral hazard
- Deposit insurance
- Thrift institution