loans, since depositors know that the bank will not be able to get away with their money without prompting a run. Lagunoff-Schreft Economists Roger Lagunoff and Stacey Schreft have argued that financial fragility arises from linked portfolios of investors. If investors have linked portfolios such that if one investor withdraws funds the investment will fail and the other investor will also take a loss, then any event that causes investors to change their portfolio could cause others to take losses. If these losses are large enough to prompt further portfolio changes, a small change could initiate a chain reaction of losses. Moreover, Lagunoff and Schreft argue that investors will anticipate the possibility of such a chain reaction, so that the belief that it may happen in the future could cause investors to reallocate their portfolios, thus triggering a self-fulfilling crisis. Fundamental crisis views Robert Van Order Economist Robert Van Order argued in 2006 that a small change in economic fundamentals can prompt a large change in asset prices and financial structure due to the asymmetric information problem in financial markets. According to Van Order, lenders can choose to make loans to borrowers directly through financial markets such as the stock market, or to operate through a financial intermediary such as a bank. Banks are better able to verify the quality of borrowers, but they charge a fee for their services in the form of lower returns to their depositors then the full returns on the investments. Financial markets allow lenders to circumvent banks and avoid this fee, but they lose the banks ability to verify the quality of borrowers. According to Van Order, a small change in economic fundamentals that made borrowers more nervous about financial markets caused some borrowers to move their savings from financial markets to banks. Such a change would raise the costs of borrowing in financial markets, which could prompt high-quality borrowers to try to get loans from banks rather than financial markets. This could snowball as all the good borrowers stop getting loans from financial markets, prompting lenders to charge still higher rates to those who remain prompting still more borrowers to switch. This process is called an adverse selection spiral, and could lead to the sudden collapse of a financial market. The opposite effect might also occur, leading to a large-scale change in the capital structure in the other direction. Allen-Gale Franklin Allen and