We learn from Gorton’s book that banks in August 2007 went right to the Federal

Question

We learn from Gorton’s book that banks in August 2007 went right to the Federal Reserve discount window to replace other sources of liquidity that were becoming scarcer. In addition managers of the bank made public announcements that they were using the discount window. True or False ?

The risk of depending on short term capital from repurchase agreements is that this financing must be rolled over frequently. If the financing can’t be rolled and there is no source of new equity financing the borrower will likely default. true or false ?

The brand of Bear Stearns was damaged by Ralph Cioffi and Matthew Tanin because their management decisions led to the collapse of two BSAM hedge funds and a civil case against them by the SEC. true or false

Explanation / Answer

1. True.

Reason: At the time of crises of 2007, banks were opt to replace discount window to replace other sources of liquidity.

2. True.

The main problem with depending on short term capital is that this is required to be rolled over fast.

3. True

The reason for damage to the brand is the collapse of two BSAM hedge funds.

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