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How did the off balance sheet activities helped in the 2008 recession?

October 19, 2010


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The top four U.S. depository banks moved about $5.2 trillion off-balance sheet into entities in the shadow banking system. This helped them bypass regulations requiring minimum capital ratio and increase their profits during the boom before 2008. The same increased their losses in 2008. Banks were required to put some of these assets back onto their books in 2009, thus their capital ratios were reduced.

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