Exam 10: Economic Analysis of Financial Regulation

Reasons regulators chose to follow regulatory forbearance rather than to close the insolvent S&Ls include all of the following EXCEPT

If the FDIC decides that a bank is too big to fail,it will use the ________ method,effectively ensuring that ________ depositors will suffer losses.

The result of the too-big-to-fail policy is that ________ banks will take on ________ risks,making bank failures more likely.

An analysis of the political economy of the savings and loan crisis helps one to understand

Because of asymmetric information,the failure of one bank can lead to runs on other banks.This is the

The Basel Accord,an international agreement,requires banks to hold capital based on

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.

Consumer protection legislation includes legislation to

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

A well-capitalized financial institution has ________ to lose if it fails and thus is ________ likely to pursue risky activities.

The S&L Crisis can be analyzed as a principal-agent problem.The agents in this case,the ________,did not have the same incentive to minimize cost to the economy as the principals,the ________.

The leverage ratio is the ratio of a bank's

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

Moral hazard is an important concern of insurance arrangements because the existence of insurance

The practice of keeping high-risk assets on a bank's books while removing low-risk assets with the same capital requirement is known as

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

Regulatory forbearance

During the 1960s,1970s,and early 1980s,traditional bank profitability declined because of