Abstract
The insolvencies of hundreds of thrift institutions (savings and loan associations and savings banks) in the late 1980s traumatized the worlds of both finance and politics. The estimated costs of honoring the federal deposit insurance guarantees on liabilities issued by these insolvent thrifts approach $200 billion on a present-value basis. A financial debacle of such proportions is a testament to the power of moral hazard in a market characterized by high leverage and limited liability.
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Cole, R.A., McKenzie, J.A., White, L.J. (1995). Deregulation Gone Awry: Moral Hazard in the Savings and Loan Industry. In: Cottrell, A.F., Lawlor, M.S., Wood, J.H. (eds) The Causes and Costs of Depository Institution Failures. Innovations in Financial Markets and Institutions, vol 9. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-0663-4_3
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DOI: https://doi.org/10.1007/978-94-011-0663-4_3
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