The Savings and Loan Crisis of the Early 1990s Was

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.