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.

---

Definitions:

Solution

A homogeneous mixture composed of two or more substances, where the solute is dissolved in the solvent.

Table Salt

A white crystalline substance that gives seawater its characteristic taste and is used for seasoning or preserving food, chemically known as sodium chloride (NaCl).

Water

A clear, flavorless, scentless, and almost colorless substance that is the primary component of the Earth's hydrosphere and the liquids found in every recognized living organism.

Hydrogen Bond

A delicate association between two molecules facilitated by the electrostatic attraction between a proton present in one and an electronegative atom in the other.