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  3. 7. a longstanding view is that mutual institutions

7. A longstanding view is that mutual institutions.g., credit unions today or many savings and...

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7. A longstanding view is that mutual institutions.g., credit unions today or many savings and loun institutions (S&L) several decades ago -are unlikely to take high risks, because their executives cannot get stock options that reward risk taking (they have no traded stock, so no options). The experience of S&Ls in the 1970s and 1980s a. confirms this, they were much less likely to make risky loans than commercial banks were, and they paid lower rates on their deposits, making them safer overall. b. goes against this; they had negative NIMs on old mortgage loans, which they tried to offset by paying high rates to get lots of insured deposits and putting that money into new high-risk loans. c. confirms this: they took so little risk that they grew slower than commercial banks, and their share of the deposit market has been shrinking for decades. d. goes against this, because the S&Ls continued to make 30-year residential mortgages throughout the 1980s even though they lost money on them, increasing their chance of default

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