The financial firms of the shadow banking system were A. less vulnerable than co

Question

The financial firms of the shadow banking system were

A. less vulnerable than commercial banks to bank runs because they were less leveraged than commercial banks.

B. more vulnerable than commercial banks to bank runs because they were more highly leveraged than commercial banks.

C. less vulnerable than commercial banks to bank runs because they were not controlled by the Federal Reserve.

D. less vulnerable than commercial banks to bank runs because they were selling risky investments such as mortgage backed securities.

Explanation / Answer

B) more vulnerable than commercial banks to bank runs because they were more highly leveraged than commercial banks
Because :- It was believed that shadow banks would gain more profit by lending money to people. However, the global economic crisis impacted them a lot.

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