Bank Failure - loans will be lower than the value of the...

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Bank Failure Suppose a deposit outflow of $20m occurs and the bank, then, sells its $10m in securities. The bank will try to call in loans and sell loans to meet its required reserves. The proceeds from the sale of the
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Unformatted text preview: loans will be lower than the value of the loans. The loss may be greater than the amount of bank capital. The bank's assets are smaller than its liabilities. The bank is insolvent....
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