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The Federal Deposit Insurance Corporation (FDIC) and Federal Reserve System (Fed) help to minimize the detrimental effects of banking panics. In this respect, the Fed
The Federal Deposit Insurance Corporation (FDIC) and Federal Reserve System (Fed) help to minimize the detrimental effects of banking panics. In this respect, the Fed provides short-term cash loans to banks experiencing runs, whereas the FDIC:
a.Manages interest rates to support investment and job growth during bad times.
b.Insures retail deposits to dull incentives for depositor runs.
c.Supervises and regulates shadow banks to safeguard financial stability.
d.Insures the liabilities of solvent banks experiencing fire sales.
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