In a blog post, former Federal Reserve Chairman Ben Bernanke described the four “basic elements” of a financial crisis: “broad-based loss of confidence in banks, runs by providers of short-term funding, fire sales of bank loans and other assets, [and] disruption of credit flows.”
a. Why might each of these four elements occur during a financial crisis?
b. Briefly explain whether each of the four elements did occur during the 2007–2009 financial crisis.