In a speech delivered in June 2008, Timothy Geithner, then president of the Federal Reserve Bank of
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The structure of the financial system changed fundamentally during the boom. ... The non-bank financial system grew to be very large. ... The institutions in this parallel financial system are vulnerable to a classic type of run, but without the protections such as deposit insurance that the banking system has in place to reduce such risks.
a. What did Geithner mean by the "nonbank financial system"?
b. What is a "classic type of run," and why were institutions in the nonbank financial system vulnerable to such a run?
c. Why would deposit insurance provide the banking system with protection against runs?
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a By the nonbank financial system Geithner was referring to investment banks money market mutual fun...View the full answer
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