By Definition, "Shadow Banks Are a Diverse Set of Financial

question 16

Essay

By definition, "shadow banks are a diverse set of financial institutions that perform some functions similar to banks, but do so outside the regulatory system that applies to traditional banking." In the recession of 2008, the government financially rescued many shadow banks. Was this a moral hazard? If yes, then why did the government do this?

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Definitions:

Title Theory

A legal concept in real estate law where the lender holds title to the property until the loan is paid off by the borrower.

Lien Theory

A concept in real estate law where the mortgage holder has a lien on the property as security for the underlying loan, but the borrower retains title to the property.

Title Theory

Title theory pertains to mortgage law where the mortgage lender holds title to the mortgaged property until the borrower has fully paid off the loan.

Mortgages

Legal agreements in which a lender lends money at interest in exchange for taking title of the borrower's property, with the condition that the conveyance of title becomes void upon the payment of the debt.