During the financial crisis of 2007-2009 in the United States it was revealed that the function of a lender of last resort had not kept pace with the evolving financial system because:
A) financial intermediaries had grown sufficiently large so as not to need a lender of last resort.
B) shadow banks lacked access to the financial resources available through the lender of last resort.
C) banks were sufficiently linked to one another that the need for a lender of last resort had diminished.
D) banks had become sufficiently diversified so as to be able to provide for their own liquidity.

Question

Quizplus · Accepted Answer

During the financial crisis of 2007-2009, it was revealed that shadow banks lacked access to the financial resources available through the lender of last resort. This was because the traditional lender of last resort, the Federal Reserve, primarily provided liquidity support to traditional banks and not to the shadow banking sector which was an important source of credit in the financial system.

During the Financial Crisis of 2007-2009 in the United States