Question

(United States) Thrifts fail for all the same reasons that banks are found to fail. List and explain the reasons given for their failure and how one might with good management keep from being impacted by these reasons.

Answer 1

The reasons are as follows,

1. The first and main reason for such failure will be solvency, when the thrifts are failed to meet its liability obligations because of failure to maintain its assets in proper manner will lead to insolvency of thrifts and as a result shutdown.
2. Mismanagement of funds, investment of funds recklessly without proper potential risk analysis will lead to failure of thrifts and the portfolio will see a huge loss as a result.

One might be able to keep away from being impacted by the above should analyse the manager of such thrift before investing and also have a clear examination on the previous experience of the manager. The performance may also be analysed in order to know the potential risks.