When the Fed acts as a "lender of last resort", like it did in the financial crisis of 2007-2008, it is performing its role of: A. Controlling the money supply B. Setting the reserve requirements C. Being the bankers' bank D. Providing for check clearing and collection

Question

Junior Kemp

Social Studies

13 August, 09:51

When the Fed acts as a "lender of last resort", like it did in the financial crisis of 2007-2008, it is performing its role of: A. Controlling the money supply B. Setting the reserve requirements C. Being the bankers' bank D. Providing for check clearing and collection

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Aylin Ibarra · Answer 1

The correct answer is C) Being the bankers' bank.

When the Fed acts as a "lender of last resort", as it did in the financial crisis of 2007-2008, it is performing its role of being the bankers' bank.

The Federal Reserve - commonly known as the Fed - plays the role of the Central bank in the United States. The Fed regulates the money supply to maintain a healthy financial system. It has to make difficult decisions in difficult times in order to avoid a crisis, as happened with the financial crisis of 2008 when many big banks and financial institutions such as P. J. Morgan or Merry Lynch were on the brink of bankruptcy. That is why the Fed had to perform its role of being the bankers' bank. Otherwise, the risk would have been a major financial crisis not only in the United States but in the international markets.