Question
How did high interest rates affect savings and loans (S&Ls;) in the 1980s?
S&Ls; lost money. Their earnings were not enough to pay off the loans they had taken out from the Federal Reserve.
S&Ls; made money. They earned high interest on loans they made throughout the 1980s.
S&Ls; made money. High interest rates attracted more depositors, and S&Ls; used their deposits to make more loans.
S&Ls; lost money. They had to pay high interest on deposits, but took in less money from low interest loans.
Answers
GPT-4o mini
The correct statement regarding the impact of high interest rates on savings and loans (S&Ls) in the 1980s is:
**S&Ls; lost money. They had to pay high interest on deposits, but took in less money from low interest loans.**
During the 1980s, high interest rates led to an increase in the cost of funding for S&Ls, as they had to offer higher interest rates to attract and retain depositors. However, many of the loans they had issued earlier were at lower interest rates. This mismatch between what S&Ls had to pay on deposits and what they earned from existing loans created significant financial strain, leading to losses for many institutions in the sector.
**S&Ls; lost money. They had to pay high interest on deposits, but took in less money from low interest loans.**
During the 1980s, high interest rates led to an increase in the cost of funding for S&Ls, as they had to offer higher interest rates to attract and retain depositors. However, many of the loans they had issued earlier were at lower interest rates. This mismatch between what S&Ls had to pay on deposits and what they earned from existing loans created significant financial strain, leading to losses for many institutions in the sector.