19-12 A major cause of the FSLIC insolvency in the 1980s was the dramatic rise in interest rates in 1979-82 that created extensive duration mismatches of assets and liabilities in the savings and loan industry.

Question

Quizplus · Accepted Answer

The statement is true. The rapid rise in interest rates during that period caused many S&Ls to experience a significant mismatch between the maturities of their assets and liabilities, leading to insolvency for the Federal Savings and Loan Insurance Corporation (FSLIC) and other savings and loan institutions.

19-12 a Major Cause of the FSLIC Insolvency in the 1980s