The volume of commercial and industrial loans made by banks has declined over the past few decades, while the volume of real estate loans has risen. Explain why this trend occurred and how it contributed to banks’ difficulties during the financial crisis of 2007-2009.
Answer to relevant QuestionsWhy do you think that U.S. banks are prohibited from holding equity as part of their own portfolios?Bank Y and Bank Z both have assets of $1 billion. The return on assets for both banks is the same. Bank Y has liabilities of $800 million while Bank Z’s liabilities are $900 million. In which bank would you prefer to hold ...Why are checking accounts not an important source of funds for commercial banks in the United States? Why have technological advances hindered the enforcement of legal restrictions on bank branching?Consider two countries with the following characteristics. Country A has no restrictions on bank branching and banks in Country A are permitted to offer investment and insurance products along with traditional banking ...
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