Gary Gorton, a professor at Yale University, has compared repurchase agreements used by shadow banks to bank
Question:
Gary Gorton, a professor at Yale University, has compared repurchase agreements used by shadow banks to bank deposits in commercial banks. He notes: “If the depositors become concerned that their deposits are not safe, they can withdraw from the bank by not renewing their repo.”
a. In what way is a repurchase agreement like a bank deposit?
b. What would be the consequences for a shadow bank if “depositors” failed to renew their repos?
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Related Book For
Money Banking And The Financial System International Edition
ISBN: 978-1292000183
2nd Edition
Authors: R. Glenn Hubbard ,Anthony P Obrien
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