Why is the FDIC's Deposit Insurance Cap So High?
… because the funds were fully insured. They just cared about the interest rate. On the other hand, the S&L managers reasoned that they had to make those funds work miracles for the short period they had them. It was their only chance to dig out, and they were willing to take big risks. For them also, the government’s insurance program had removed any chance of loss to their depositors, so many of them plunged into high-profit, high-risk real-estate developments. Deals began to go sour, and 1979 was the first year since the Great Depression …