Exam 12: Financial Crises

Firms that are designated as systemically important financial institutions (SIFIs)are subject to all of the following additional Federal Reserve regulations EXCEPT

The originate-to-distribute business model has a serious ________ problem since the mortgage broker has little incentive to make sure that the mortgagee is a good credit risk.

As "haircuts" increased during 2007-2009,financial institutions found that to borrow the same loan amount now required ________ collateral.

The Volcker Rule addresses the off-balance-sheet problem involving

When the value of loans begins to drop,the net worth of financial institutions falls causing them to cut back on lending in a process called

When financial institutions go on a lending spree and expand their lending at a rapid pace they are participating in a

The government passed the Economic Recovery Act in October 2008 to prevent the financial crisis from continuing to worsen.A controversial component of this act was the

The global financial crisis of 2007-2009 not only led to a worldwide recession,but also a ________ in the European nations that use the euro currency.

If a borrower takes out a $200 million loan in a repo agreement and is asked to post $220 million of mortgage-backed securities as collateral,the "haircut" is

The ________,the difference between the interest rate on Baa corporate bonds and U.S.Treasury bonds.rose sharply during the Great Depression.

Which investment bank filed for bankruptcy on September 15,2008 making it the largest bankruptcy filing in U.S.history?

One suggested method of dealing with the too-big-to-fail problem is to reimpose the restrictions that were in place under

Debt deflation occurs when

A financial crisis occurs when an increase in asymmetric information from a disruption in the financial system

In a bank panic,the source of contagion is the

One suggested method of reducing excessive risk-taking by SIFIs is to require them to hold ________ capital when credit is expanding rapidly and ________ capital when credit is contracting.

A substantial decrease in the aggregate price level that reduces firms' net worth may stall a recovery from a recession.This process is called

A ________ pays out cash flows from a collection of assets in different tranches,with the highest-rated tranch paying out first,while lower ones paid out less if there are losses on the underlying assets.

The economy recovers quickly from most recessions,but the increase in adverse selection and moral hazard problems in the credit markets caused by ________ led to the severe economic contraction known as The Great Depression.

Typically,the economy recovers fairly quickly from a recession.Why did this NOT happen in the United States during the Great Depression?