Over the past few decades, what no so very bright strategies were utilized by financial institutions that contributed negatively to the mortgage crisis and banking crisis that we experienced during 2006-2010? 1) Savings & Loans and other financial institutions invested in fairly unstructured types of financial investments-including the Mortgage Backed Securities created by Freddie and Fannie. O2) Commercial banks worked diligently to control their use of debt and were very careful about who they loaned money to. 3) Many smaller banks over-extended their debt loads (borrowing) and had multiple loans with larger banks, so the failure of the smaller bank caused some of the larger banks to fail, too. 4) Because financial institutions lobbied for deregulation; in that, they did not want the government to oversee their choices; thus, they became fully exposed to the risks of bubbles and crashes in adjoining markets-such as the auto industry collapse and the housing market collapse. 5) 1, 3 and 4 are correct.

Over the past few decades, what no so very bright strategies were utilized by financial institutions that contributed negatively to the mortgage crisis and banking crisis that we experienced during 2006-2010? 1) Savings & Loans and other financial institutions invested in fairly unstructured types of financial investments-including the Mortgage Backed Securities created by Freddie and Fannie. O2) Commercial banks worked diligently to control their use of debt and were very careful about who they loaned money to. 3) Many smaller banks over-extended their debt loads (borrowing) and had multiple loans with larger banks, so the failure of the smaller bank caused some of the larger banks to fail, too. 4) Because financial institutions lobbied for deregulation; in that, they did not want the government to oversee their choices; thus, they became fully exposed to the risks of bubbles and crashes in adjoining markets-such as the auto industry collapse and the housing market collapse. 5) 1, 3 and 4 are correct.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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