The major risk that caused widespread failures in Savings and Loans in the 1980s was interest rate risk.

Question

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The Savings and Loan crisis of the 1980s was largely due to interest rate risk, as these institutions had borrowed short-term at lower interest rates to invest in long-term fixed-rate mortgages. When interest rates rose, their cost of borrowing increased significantly while their income from these mortgages did not, leading to widespread failures.

The Major Risk That Caused Widespread Failures in Savings and Loans