Many Investment Banks Quickly Collapsed When the Housing Market Collapsed

question 24

Multiple Choice

Many investment banks quickly collapsed when the housing market collapsed because

• A) the Federal Reserve was unwilling to provide them with short-term loans.
• B) they ignored the risk assigned by the rating agencies, resulting in leverage ratios that were too low.
• C) new regulations required investment banks to maintain more capital against their residential housing loans than was true for commercial business loans.
• D) they were highly leveraged and had little reserves on hand to meet the short-term debt obligations of the mortgage-backed securities.

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