Before 2010 and passage of Dodd-Frank, shadow banks offered their customers a higher rate of return than commercial banks because shadow banks _____, but commercial banks _____.
A)could pay interest on deposits; could not.
B)were allowed to invest in stocks of foreign corporations; could invest only in stocks of U.S. corporations.
C)had to hold a large amount of reserves and capital; were not required to keep as much in reserve
D)were not subject to reserve and capital requirements; had to hold reserves and meet capital requirements

Question

Quizplus · Accepted Answer

Before 2010 and Dodd-Frank, shadow banks were not subject to reserve and capital requirements as commercial banks were. This allowed shadow banks to offer a higher rate of return to their customers. Commercial banks, on the other hand, had to hold reserves and meet capital requirements, which limited their ability to offer higher returns. Therefore, choice D is the best answer.

Before 2010 and Passage of Dodd-Frank, Shadow Banks Offered Their