Which of the following represents the most significant reason for the collapse of the U.S.banking system in 2008?
A)In the 1990s, most large U.S. investment banks were reorganized into public trading companies.
B)In the 2000s, most investment banks started to generate most of their income from fees charged for underwriting, consulting, and brokerage activities.
C)New regulations introduced in the 2000s resulted in restrictions that restrained the operations of investment banks.
D)New regulations in the 2000s allowed investment banks to issue unprecedented amounts of debt to finance their operations.

Question

Quizplus · Accepted Answer

The new regulations introduced in the 2000s that allowed investment banks to issue unprecedented amounts of debt to finance their operations contributed significantly to the collapse of the U.S. banking system in 2008. This created a highly leveraged financial system that was susceptible to shocks and failures, and ultimately led to the global financial crisis.

Which of the Following Represents the Most Significant Reason for the Collapse