Banking Assignment Please answer all 4 questions separately, explain in detail, to you can use the attached doc to guide you, and stick with the answer size provided at the end of each question. 1....

1)
Savings and loan crisis:
The financial system went through a period of turmoil in the 1980s. At the time, the focus was on the national market for loans and savings (S&L). In the late 1970s and early 1980s, both inflation and interest rates rose sharply. This created two problems for savings and loans. Initially, depositors had to withdraw their cash because the federal government fixed the interest rate they could pay on their deposits, which was substantially lower than what they could obtain elsewhere. Furthermore, the savings and loan industry mostly offered long-term, fixed-rate mortgages. As interest rates climbed, the value of these mortgages plummeted, effectively wiping out the savings and credit industry's net worth.
Savings institutions are particularly sensitive to increasing interest rates due to their comparatively larger concentration of mortgage lending and reliance on short-term deposits for lending. When inflation escalated and interest rates began to climb dramatically in the late 1970s, many savings and loan institutions began to incur significant losses. The lending rates you had to give to attract deposits skyrocketed, while the amount you received on long-term, fixed-rate mortgages stayed same. Losses began to mount.
In the early 1980s, as inflation and interest rates began to fall, the savings and loan business began to recover somewhat, but the biggest problem was that the regulatory authorities did not have the capacity to solve the institutional insolvency. For example, in 1983, the cost of payments to insurance depositors by bankrupt organizations was estimated at approximately $25 billion. But the savings bank insurance fund, known as FSLIC, had only $6 billion in reserves.
As a result, the regulatory reaction has waned. Many insolvent savings organizations continue to operate, and financial troubles only deteriorate over time. They were du
ed "zombies." Furthermore, judicial and regulatory choices have decreased capital norms. In addition to residential mortgages, federally registered savings and lending organizations are permitted to provide additional (and ultimately riskier) loans. Many states have enacted comparable or
oader regulations for government-approved foundations. The investor protection limit was raised from $40,000 to $100,000 in makes it easier for bankrupt or near-insolvent organizations to attract deposits in order to get loans.
The savings and lending business has grown rapidly as a result of these regulatory and legal developments. Savings sector assets increased by 56 percent between 1982 and 1985, more than double the 24 percent increase seen by banks. This expansion was spu
ed by a surge in deposits when Zombie Savers began paying greater interest rates to generate cash. These zombies adopted an all-in strategy to invest in more hazardous and dangerous initiatives in the hopes of reaping more rewards. If such profits were not achieved, citizens would be forced to pay bills so because entities already were bankrupt and the FSLIC's assets were insufficient to cover the losses.
Policymakers responded by enacting the Deposit Deregulation and Monetary Control Act of 1980. However, federal authorities lacked the capacity to deal with the losses made by savings and lending organizations. Instead, they made efforts to relax industrial rules in the expectation of growing out of the problem. The industry's troubles, though, have only been worsened. Finally, taxpayers were requested for financial assistance, and Congress was forced to enact important legislative reforms at the end of the 1980s.
2.
Savings and bo
owing were not permitted to pay risk loans with...