What problems could shadow banks have potentially avoided

Assignment Help Finance Basics

Reference no: EM131304169

In a paper written in April 2010, looking back at the financial crisis, former Fed Chair Alan Greenspan argued: At least partly responsible [for the severity of the financial collapse] may have been the failure of risk managers to fully understand the impact of the emergence of shadow banking that increased financial innovation, but as a consequence, also increased the level of risk. The added risk had not been compensated by higher capital.

a. How did the emergence of shadow banking increase the risk to the financial system?

b. What does Greenspan mean that "the added risk had not been compensated by higher capital"? By holding more capital, what problems could shadow banks have potentially avoided?

Reference no: EM131304169

Questions Cloud

Consider the decision to be biggest mistake of the crisis : Why did the Treasury and the Federal Reserve allow Lehman Brothers to fail? Why do some consider the decision to be the biggest mistake of the crisis?

Difference between concentrated and differentiated strategy : List the differences between concentrated and differentiated strategies, and describe the advantages and disadvantages of each.

What is a market segment profile : What dimensions are used to segment business markets?- What is a market segment profile? Why is it an important step in the target-market selection process?

What were the various problems with the articles : What were the various problems with the Articles of Confederation? How did Shays Rebellion motivate "the founders" to hold a convention to resolve the problems of the Articles? Considering the list of problems related to the Articles of Confederati..

What problems could shadow banks have potentially avoided : What does Greenspan mean that "the added risk had not been compensated by higher capital"? By holding more capital, what problems could shadow banks have potentially avoided?

What is a sales forecast and why is it important : Why is selecting appropriate target markets important to an organization that wants to adopt the marketing concept philosophy?

Identify driving forces for change in external environment : Identify the major driving forces for change in the external environment of the motorcycle industry. Analyze the dynamics of competition using Porter's Five Forces Model of Competition. Correctly assess the dynamics of competition.

What is a lender of last resort : What is a lender of last resort? How is being a lender of last resort connected to the too-bigto-fail policy?

Explain the strategy being used to reach that market : Locate an article that describes the targeting strategy of a particular organization. Describe the target market, and explain the strategy being used to reach that market.

User Account

All Pages