How can an investment bank be subject to a run

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Reference no: EM131304551

In March 2008, the U.S. Treasury and the Federal Reserve arranged for the sale of the Bear Stearns investment bank to JPMorgan Chase in order to avoid Bear Stearns having to declare bankruptcy. A columnist for the New York Times noted that:

It was an old-fashioned bank run that forced Bear Stearns to turn to the federal government for salvation. . . . The difference is that Bear Stearns is not a commercial bank, and is therefore not eligible for the protections those banks received 75 years ago when Franklin D. Roosevelt halted bank runs with government guarantees.

a. How can an investment bank be subject to a run?

b. What "government guarantees" did commercial banks receive 75 years ago?

c. How did these government guarantees halt commercial bank runs?

Reference no: EM131304551

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