Reply #6: the Savings and Loan Crisis is a clear example of what the author try to explain [View All]

[AlphaCentauri]

The U.S. Savings and Loan crisis of the 1980s and 1990s was the failure of several savings and loan associations in the United States. The ultimate cost of the crisis is estimated to have totaled around USD$160.1 billion, about $124.6 billion of which was directly paid for by the U.S. government -- that is, the U.S. taxpayer, either directly or through charges on their savings and loan accounts-- <1>, which contributed to the large budget deficits of the early 1990s. The resulting taxpayer bailout ended up being even larger than it would have been because moral hazard and adverse-selection incentives compounded the system’s losses. <2>

The concomitant slowdown in the finance industry and the real estate market may have been a contributing cause of the 1990-1991 economic recession. Between 1986 and 1991, the number of new homes constructed per year dropped from 1.8 million to 1 million, the lowest rate since World War II. <3>

http://en.wikipedia.org/wiki/Savings_and_Loan_crisis