Exam 25: Exploring the Complexities of Financial Services and Regulation

Allowing privately owned firms to decide for themselves what services to provide and in what quantity is known as privatization.

In 1999, the U.S. Congress lifted restrictions in place since the 1930s and allowed banks and financial-service holding companies the power to combine menus of banking, insurance, securities underwriting services and real estate brokerage services under the same financial-service organization.

The previous trend toward the removal of government restrictions on the freedom of the financial markets to trade and allocate resources is called:

Public-sponsored insurance of financial assets carry no adverse side-effects.

For the financial-services industry, the technological revolution in information analysis, storage, and transfer has:

As faster and lighter computer chips are developed, pocket-sized PCs, iPods, and smart phones increasingly will be able to merge information storage, information retrieval, telecommunications and computing power into one lightweight, portable information-gathering resource, eventually available to almost everyone at low cost.

The debate over protecting the privacy of financial-service consumers is likely to persist far into the foreseeable future due to the increased use of technology in the financial market.

The 1999 Gramm-Leach-Bliley Act specified that consumers of financial services had to "opt out" in writing if they didn't want financial-services companies sharing their "nonpublic" (private) information with others.

When any financial institution develops serious problems that reach public notice, the public's confidence in other financial institutions may be damaged as well. The result can be as follows:

Increased disclosure requirements likely to be imposed on financial institutions will enable both investors and customers of financial institutions to make more intelligent decisions and the most economical use of available resources.

The results of globalization are falling geographic barriers to international competition and strong pressure to consolidate smaller financial-service institutions into larger ones.

The financial system works to channel scarce loanable funds (credit) to their most productive uses only if individuals and businesses are willing to save and trust those savings to financial institutions and only if other businesses and individuals are willing to rely on the financial system to provide credit to support their consumption and investment.

Mere knowledge of existing risk-management tools does not guarantee that all risk exposures will be adequately dealt with.

As long as some financial firms are taxed and regulated differently from other financial firms, the so-called "level playing field" issue will never go away.

Using the the description or the definition below, identify each of the key terms and concepts presented in this chapter a. The number of new financial services being offered today is growing rapidly. b. Financial firms become more and more alike in their service menus and all offer broader service menus over time. c. Smaller financial firms increasingly are being combined into larger financial firms. d. The pooling of loans and issuing securities for public sale based on the expected cash flows out of the loan pool. e. Federal law permitting banks, insurance companies and security firms to merge into consolidated financial firms.

Confirmation of securities trades (clearing) and getting proper payment and timely delivery of securities bought and sold (settlement) will be more challenging in a globalized financial system.

A potential benefit of increased consolidation and conversion is that it provides companies the resources needed to attract customers who value a personal touch in their financial services.

When a consumer's personal information is stolen and used to access their bank accounts and other assets, it is referred to as "identity theft."

The fast pace of technological advancement is typically outpaced by individuals desire to adopt new technology.

During the 1930s, with thousands of banks failing, the U.S. Congress created the Federal Deposit Insurance Corporation (FDIC) to provide insurance coverage for small deposits.