The savings and loans crisis of the 1980s was caused by an asset bubble in commercial real estate.

Question

Quizplus · Accepted Answer

The savings and loans crisis of the 1980s was caused by an asset bubble in commercial real estate. In the early 1980s, the Federal Reserve raised interest rates to combat inflation. This led to a recession, which caused a decline in demand for commercial real estate. At the same time, deregulation of the savings and loan industry allowed these institutions to invest in riskier assets, including commercial real estate. This led to an asset bubble in this sector, and many savings and loans institutions became insolvent when the bubble burst. The crisis ultimately led to the closure of more than 1,000 savings and loans institutions and cost taxpayers billions of dollars.

The Savings and Loans Crisis of the 1980s Was Caused