It is a fact that the federal government (1) encouraged the development of the savings andloan industry, (2) virtually forced the industry to make long-term fixed-interest-rate mortgages,and (3) forced the savings and loans to obtain most of their capital as deposits thatwere withdrawable on demand.a. Would the savings and loans have higher profits in a world with a “normal” or aninverted yield curve? Explain your answer.b. Would the savings and loan industry be better off if the individual institutions soldtheir mortgages to federal agencies and then collected servicing fees or if the institutionsheld the mortgages that they originated?

It is a fact that the federal government (1) encouraged the development of the savings andloan industry, (2) virtually forced the industry to make long-term fixed-interest-rate mortgages,and (3) forced the savings and loans to obtain most of their capital as deposits thatwere withdrawable on demand.a. Would the savings and loans have higher profits in a world with a “normal” or aninverted yield curve? Explain your answer.b. Would the savings and loan industry be better off if the individual institutions soldtheir mortgages to federal agencies and then collected servicing fees or if the institutionsheld the mortgages that they originated?

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter14: The Financial Crisis And The Great Recessio

Section: Chapter Questions

Problem 1TY

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