In discussing the 2007–2009 financial crisis, Federal Reserve Vice Chairman Stanley Fischer observed: “The fact that losses in what was a relatively small part of the mortgage market quickly spread through the rest of the financial system illustrates how the complex interconnections among banks and nonbanks can amplify shocks in significant and unanticipated ways.”
a. What “nonbanks” was Fischer referring to?
b. What interconnections among banks and nonbanks was he referring to?
c. What did he mean by writing that these interconnections can “amplify shocks”? What shocks were these interconnections amplifying?