Banks sometimes manage liquidity risk by issuing large, marketable certificates of deposits when other deposits decline. How important is this practice? Plot the share of large time deposits (FRED code: LTDACBM027SBOG) in total deposits (FRED code: DPSACBM027SBOG). Explain how this share evolved over the long run and after 2004.
Answer to relevant QuestionsWhat share of U.S. banks fail? Plot since 2000 the fraction (in percent) of bank failures (FRED code: BKFTTLA641N) relative to the number of banks (FRED code: USNUM). Comment on the timing and the proportion of failures. ...What was the main rationale behind the separation of commercial and investment banking activities in the Glass-Steagall Act of 1933? Why was the Act repealed?Statistically, teenage drivers are more likely to have an automobile accident than adult drivers. As a result, insurance companies charge higher insurance premiums for teenager drivers. Suppose one insurance company decided ...One aspect of the 2007-2009 financial panic was a run on some money market mutual funds (MMMFs). Plot weekly data for 2008 on institutional MMMF deposits (FRED code: WIMFSL) and identify the timing of the run visually. Next, ...Do you think that the central bank, as lender of last resort, should also supervise the financial industry? Why or why not?
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