Answered: What role did the shadow banking system…

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter15: The Federal Reserve System And Monetary Policy

Section: Chapter Questions

Problem 12AA

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What role did the shadow banking system play in the
2007–2009 financial crisis?

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Shadow banks are those financial entities that help in the process of lending long-term loans and borrowing short-term. These are not under the banking regulations and even don't have any access to the lender of last resort. It basically includes investment banks, money market mutual funds, ABCP (asset backed commercial papers) & repo agreements.

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