Exam 11: Economic Analysis of Financial Regulation

The bailout of the savings and loan industry was much delayed and,therefore,much more costly to taxpayers because

Deposit insurance has not worked well in countries with

Savings and loan regulators allowed S&Ls to include in their capital calculations a high value for intangible capital called

The existence of deposit insurance can increase the likelihood that depositors will need deposit protection,as banks with deposit insurance

A common element in all of the banking crisis episodes in different countries is

As in the United States,an important factor in the banking crises in Norway,Sweden,and Finland was the

When bad drivers line up to purchase collision insurance,automobile insurers are subject to the

Depositors lack of information about the quality of bank assets can lead to

FDICIA ________ incentives for banks to hold capital and ________ incentives to take on excessive risk.

In the early stages of the 1980s banking crisis,financial institutions were especially harmed by

Moral hazard problems increased in prominence in the 1980s

The ________ that required separation of commercial and investment banking was repealed in 1999.

With ________,firms value assets on their balance sheet at what they would sell for in the market.

The ability to use the too-big-to-fail policy was curtailed by the passage of the FDICIA.To use this action today,the FDIC must get approval of a two-thirds majority of both the Board of Governors of the Federal Reserve and the directors of the FDIC and also the approval of the

In order to ensure that borrowers have an ability to repay residential mortgages,the new consumer protection legislation requires lenders to do all of the following except

Banking crises have occurred throughout the world.What similarities do we find when we look at the different countries?

To prevent bank runs and the consequent bank failures,the United States established the ________ in 1934 to provide deposit insurance.

The government safety net creates both an adverse selection problem and a moral hazard problem.Explain.

Macroprudential supervision policies try to prevent a leverage cycle by changing capital requirements so that they ________ during an expansion and ________ during a downturn.

The Japanese banking system went through a cycle of ________ in the 1990s similar to the one that occurred in the U.S.in the 1980s.