I got a question regarding financial crisis?
1. What is a bank run? What is the purpose of the Glass-Steagall legislation? 2. Use CDO's, credit swap, auction rate securities, or other examples to explain the concept of "shadow banking". You need to at least use two examples. 3. List and explain the key reasons for the 2006-07 housing bubble, based on the reading you are assigned (you need to quote and refer the title and page numbers of those articles, not just random sources. 4. Combine your answer for item 2 and 3 to explain the causes the 2007-09 financial crisis. YOU NEED TO use an example (such as Lehman Brothers) to support your story.
- OiyLv 51 month ago
A bank-run is a situation that the bank can't pay your deposits back, even without interest. It's because a requirement reserve system that keeps the reserve less than 100%. The Glass-Steagall Act of 1933 was repelled again in 1999 to separate the investment banks from commercial banks. So that it can be controlled by the FED. The shadow banking such as in China has performed the same as commercial banks to provide the chap loans but not subject by laws. This was all about the recession in 2008 when the American Dream project has reduced the mortgage rate for Americans, so they bought their houses which have led to the foreclosure after that because their income cannot reach for the payment. That was called the subprime crisis.
- ZirpLv 71 month ago
A bank-run is when people all go to the bank and withdraw whatever there is in their accounts. As banks lend out several times what people have in their accounts, this is problematic