While deposit insurance was designed to make the banking industry more stable,it contributed to the banking crisis of the 1980s because:
A)the FDIC only insured commercial banks.
B)the ceiling on insured deposits was too low.
C)too many banks were insufficiently insured.
D)depositors became too complacent about the risks that the banks were taking.
E)unsafe banks were "kicked out" of the deposit insurance system.

Question

Quizplus · Accepted Answer

Deposit insurance created a false sense of security among depositors, who believed that their deposits were fully backed by the government and therefore took on more risk than they would have otherwise. This led to an increase in the number of risky loans being made by banks, ultimately contributing to the banking crisis of the 1980s.

While Deposit Insurance Was Designed to Make the Banking Industry