Which of the following was NOT a reason for the credit crunch of 2008-09?
A)mistrust between financial intermediaries
B)illiquidity of debt markets
C)the arrest of Bernard Madoff
D)bankruptcy of one of the leading financial institutions

Question

Quizplus · Accepted Answer

The arrest of Bernard Madoff was a significant event in the financial world, but it was not a direct cause of the credit crunch. The other three options all contributed to the credit crunch in different ways. Mistrust between financial intermediaries made it difficult for institutions to lend to each other, leading to a freeze in liquidity. Illiquidity of debt markets made it hard for companies to access the credit they needed to operate, which led to bankruptcies and defaults. And the bankruptcy of leading financial institutions like Lehman Brothers caused a shockwave throughout the financial system, further exacerbating the credit crunch.

Which of the Following Was NOT a Reason for the Credit