Banking panics and regulations
Which of the following describe a common cause of bank panics? Check all that apply.
a. Bank executives are not trained in risk management.
b. Rumors that a bank is in financial trouble spread easily.
c. Potential buyers of the assets of a bank, incorrectly rumored to be distressed, may suspect the assets to be of poor quality.
Which of the following are reasons why bank panics were largely eliminated after 1933? Check all that apply.
A. The Federal Reserve ("the Fed") stands ready to inject reserves into the system more quickly in a crisis.
b. Banks are required to hold a significant percentage of their assets as bank capital.
c. The shadow banking system has grown larger than the regular banking system.