The Fed recapitalizes banks:
A) on a regular basis as a way to increase the money supply.
B) only in dire emergencies to avoid insolvency.
C) as an attempt to limit the number of new loans extended by banks.
D) as a way of earning profits,which in turn are passed on to the federal government.

Question

Quizplus · Accepted Answer

The Fed recapitalizes banks only in dire emergencies to avoid insolvency, such as during times of financial crisis or economic downturns. This is done to prevent the banking system from collapsing and to stabilize the economy. It is not done on a regular basis as a means of increasing the money supply, limiting new loans, or earning profits for the federal government.

The Fed Recapitalizes Banks