(a) Why is the originate-to-distribute business model of the shadow banking system subject to the principal-agent problem?

(b) In what ways are the economic downturn caused by the COVID-19 pandemic similar to a financial crisis?

(c) Can the COVID-19 pandemic lead to a financial crisis? Explain your answer.

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Consolidated Statements of Operations (millions, except per share data) Sales Other revenue Total revenue Cost of sales Selling, general and administrative expenses FINANCIAL STATEMENTS Depreciation and amortization (exclusive of depreciation included in cost of sales) Operating income Net interest expense Net other (income) / expense Earnings from continuing operations before income taxes Provision for income taxes Net earnings from continuing operations Discontinued operations, net of tax Net earnings Basic earnings per share Continuing operations Discontinued operations Net earnings per share Diluted earnings per share Continuing operations Discontinued operations Net earnings per share Weighted average common shares outstanding Basic Diluted Antidilutive shares Note: Per share amounts may not foot due to rounding. See accompanying Notes to Consolidated Financial Statements. $ S $ $ S $ 2019 77,130 S 982 78.112 54,864 16,233 2,357 4,658 477 (9) 4,190 921 3,269 12 3,281 $ 6.39 $ 0.02 6.42 $ 6.34 $ 0.02 6.36 $ 510.9 515.6 Page view A Read aloud Draw 2017 2018 74,433 $ 71,786 923 928 75,356 53,299 15,723 2,224 4,110 461 (27) 3,676 746 2,930 7 2.937 S 5.54 $ 0.01 5.55 $ 5.50 S 0.01 5.51 $ 528.6 533.2 72,714 51,125 15,140 2,225 4,224 653 (59) 3,630 722 2,908 6 2.914 5.32 0.01 5.32 5.29 0.01 5.29 546.8 550.3 Consolidated Statements of Operations (millions, except per share data) Sales Other revenue Total revenue Cost of sales Selling, general and administrative expenses FINANCIAL STATEMENTS Depreciation and amortization (exclusive of depreciation included in cost of sales) Operating income Net interest expense Net other (income) / expense Earnings from continuing operations before income taxes Provision for income taxes Net earnings from continuing operations Discontinued operations, net of tax Net earnings Basic earnings per share Continuing operations Discontinued operations Net earnings per share Diluted earnings per share Continuing operations Discontinued operations Net earnings per share Weighted average common shares outstanding Basic Diluted Antidilutive shares Note: Per share amounts may not foot due to rounding. See accompanying Notes to Consolidated Financial Statements. $ S $ $ S $ 2019 77,130 S 982 78.112 54,864 16,233 2,357 4,658 477 (9) 4,190 921 3,269 12 3,281 $ 6.39 $ 0.02 6.42 $ 6.34 $ 0.02 6.36 $ 510.9 515.6 Page view A Read aloud Draw 2017 2018 74,433 $ 71,786 923 928 75,356 53,299 15,723 2,224 4,110 461 (27) 3,676 746 2,930 7 2.937 S 5.54 $ 0.01 5.55 $ 5.50 S 0.01 5.51 $ 528.6 533.2 72,714 51,125 15,140 2,225 4,224 653 (59) 3,630 722 2,908 6 2.914 5.32 0.01 5.32 5.29 0.01 5.29 546.8 550.3

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Answer a The originatetodistribute business model of the shadow banking system is subject to the principalagent problem because the system relies on financial institutions to originate loans and then ... View the full answer