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3. Assume required reserves are 10% of deposits. A Bank (Billions of $) Assets Liabilities 100 Reserves 1000 Deposits 900 Loans 120 BC 200 Securities

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3. Assume required reserves are 10% of deposits. A Bank (Billions of $) Assets Liabilities 100 Reserves 1000 Deposits 900 Loans 120 BC 200 Securities 80 Borrowing If there is a sudden run on deposits of $100 billion, what problems does this cause for this bank? Show four ways this bank can deal with the problem created in question 4a. Now suppose this bank has to write off $130 billion in mortgages. What problem is the bank facing now? How will the problem in question 1c be resolved? a. b. c. d

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