In March$2008,$ the U$.$S$.$ Treasury and the Federal Reserve arranged for the sale of the Bear Stearns investment bank to JPMorgan Chase in order to prevent Bear Stearns from having to declare bankruptcy. A columnist for the New York Times$$ noted:

It was an$$ old$-$fashioned bank run that forced Bear Stearns to turn to the federal government for salvation....The difference is that Bear Stearns is not a commercial$$ bank, and is therefore not eligible for the protections those banks received $75$ years ago when Franklin D$.$ Roosevelt halted bank runs with government guarantees.

$$Source: Floyd$$ Norris, $"$F$.$D$.$R$.\text{'}$s Safety Net Gets a Big$$ Stretch," New York

Times$,$

March$15,2008.$

Part $2$

How can an investment bank be subject to a$$ run?

A$.$

It can be subject to a run when large sums are invested in bonds.

B$.$

It can be subject to a run if investors renew their repurchase agreements.

C$.$

It can be subject to a run when the Federal Reserve provides additional protection to commercial banks.

D$.$

It can be subject to a run when

counterparties want to cash out their investments.

Part $3$

What$$ "government guarantees" did commercial banks receive $75$ years$$ ago?

A$.$

This would refer to the CFTC$.$

B$.$

This would refer to the FDIC.

C$.$

This would refer to the SEC.

D$.$

This would refer to TARP.

Part $4$

How did these government guarantees halt commercial bank$$ runs?

A$.$

The FDIC eliminated the incentive of a bank run because a$$ depositor's money was insured if the bank failed.

B$.$

The government prevented deposit withdrawals by using extra taxation policy.

C$.$

In case of$$ bankruptcy, the government promised to cover all losses with$$ T$-$bills.

D$.$

Under the$$ FDIC, all commercial banks become nationalized.

How can an investment bank be subject to a run?What "government guarantees" did commercial banks receive $75$ years ago?How did these government guarantees halt commercial bank runs?