Question

1. Explain the maturity imbalance problem faced by savings and loan associations that hold fixed-payment mortgages as assets.

Answer 1

Savings and loan association storical you have used short term series deposits to fund long term, fixed rate home loan. The savings and loan was the most significant Bank and the crisis ended what had one been a secure source of mortgages. It also destroyed the idea of state-run bank insurance funds.the savings and loan crisis was a slow moving financial disaster the crisis came to a head and resulted in the failure of nearly a third of 3234 savings and loan associations in the United States between 1986 and 1995.

a savings and loan associations of thrift institutions is a financial institution that specialises in accepting savings deposits and making mortgage and other loans.the term SL and thrift are mainly used in the United States similar institutions in the United Kingdom, Ireland and some commonwealth countries include building societies and trustee saving banks. they are often mutually held meaning that the depositors and borrowers are members with voting rights, and have ability to who directed the financial and managerial goals of the organisation like the members of a credit union or the policyholders of a mutual insurance Company.while it is possible for an savings and loan associations to be a joint stock company and even publicly traded in such instances it is no longer to Ali Amritsar association,and depositors and powers no longer have membership rights and managerial control.by-law gift can have no more than 40% of their landing in commercial loans their focus on mortgage and consumer loans make them particularly vulnerable to housing downturn such as the deep one the US experienced in 2007.

Situations comes of imbalance in the savings and loan, as the extra ordinary cost of savings and loan crisis still astounds many taxpayer, depositors and policy makers. The cost of building out the federal savings and loan insurance corporation which insured the deposits in failed savings and loan association mein eventually exceed dollar 160 billion.at the end of 2004 the direct cost of the savings and loan crisis to text their was dollar 124 billion according to the financial statement published by the federal deposit insurance corporation (FDIC), the successor to the FSLIC.additionally healthy savings and loan association as well as commercial banks have been taxed approximately another dollar 30 billion to pay for savings and loan clean up cost finally the federal court are still resolving the so-called Goodwill cases steaming from regulator inspired measures of feeling saving and loss into healthy saving and loans associations.