What role did the shadow banking

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system play in the 2007-2009 financial crisis?

A.

An increase of funding from the shadow banking system resulted in a decrease in the issuance of CDOs, increasing the severity of adverse selection and moral hazard problems.

B.

A large amount of funds flowed through the shadow banking system, which increased interest rates and fueled some of the housing bubble.

C.

A decrease of funding from the shadow banking system caused a restriction of lending and a decline in economic activity.

D.

The shadow banking system was able to take on significantly less risk than other financial firms, preventing the economy from losses.