You are a bank regulator working for the Federal Reserve. It is your job to see whether banks are solvent or insolvent, liquid or illiquid. Fit each of the following banks into one of the following four categories:
1. Liquid and solvent (best)
2. Illiquid but solvent (probably needs short-term loans from other banks or from the Fed)
3. Liquid but insolvent (should be shut down immediately: could fool people for a while if not for your good efforts)
4. Illiquid and insolvent (should be shut down immediately)
a. Bank of DelMarVa
Short-term assets ……………………… $10 million
Short-term liabilities ………………….. $6 million
Total assets……………………………… $40 million
Total liabilities ………………………….. $50 million
b. Bank of Escondido
Short-term assets ……………………… $6 million
Short-term liabilities ………………….. $10 million
Total assets……………………………… $50 million
Total liabilities ………………………….. $40 million
c. Bank of Previa
Short-term assets ……………………… $12 million
Short-term liabilities ………………….. $10 million
Total assets……………………………… $50 million
Total liabilities ………………………….. $40 million
d. Bank of Cambia
Short-term assets ……………………… $6 million
Short-term liabilities ………………….. $10 million
Total assets……………………………… $500 million
Total liabilities ………………………….. $400 million
e. Bank of Marshall
Short-term assets ……………………… $120 million
Short-term liabilities ………………….. $100 million
Total assets……………………………… $500 million
Total liabilities ………………………….. $400 million