Which of the following is true regarding the recent financial crisis? a. FIs’ ne

Question

Which of the following is true regarding the recent financial crisis?  

a. FIs’ new policy of “originate to distribute” caused banks to increase their lending standards for issuing new loans.

b. FIs increasingly relied on repos to fund their loans and when the housing market bubble burst, they were unable to use repackaged loans as collateral in the repo market.

c. The recent financial crisis was not a bank run because deposits are Federally insured by the FDIC.

d. The “originate to distribute” model moved loans off of banks’ balance sheets and banks were no longer able to issue new loans.

e. All of the above are not true.

Explanation / Answer

Answer :- Option b). FIs (Financial institutions) increasingly relied on repos to fund their loans and when the housing market bubble burst, they were unable to use repackaged loans as collateral in the repo market.

Explanation :- The statement mentioned in option (b) to the above given question is true (correct) about the recent financial crisis in an economy.

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