Exam 5: Current Multinational Financial Challenges: the Credit Crisis of 2007 - 2009

CDOs are typically sold to the market in categories representing the credit quality of the borrowers in the mortgages.Generally speaking,the ________ tranches have a credit quality of AAA.________ tranches have a quality ranging from AA to BB,and ________ tranches have ratings below BB.

Securitization

Which of the following is NOT a result of the Financial Reform Law of 2010?

In the face of a world-wide recession,many currencies fell against the traditional three safe-haven currencies,the dollar,the euro,and the yen,

As a result of the 2007 - 2009 financial crisis,Merrill Lynch was merged into ________.

The term ________ goes far back in financial history,and indicates that if large institutions were allowed to collapse,they would take a multitude of smaller institutions with them,both financial and non-financial.A failure ripple-effect of this magnitude is simply considered unacceptable by most governments.

Following World War II,the United States has been one of the first major industrial countries to use securitization in its savings and loan and commercial banking systems.

Which of the following large U.S.firms was allowed to fail in 2008 and forced to file for bankruptcy?

Which of the following do the authors suggest will aid in "pulling derivatives back from the brink"?

Most commodity prices rose in the first half of 2008 but then oil prices plummeted while other commodity prices continued to rise.

Explain BRIEFLY how the repeal of the Glass-Steagall and the Bank Holding Company Acts and the passage of the Gramm-Leach-Bliley Financial Services Modernization Act of 1999 contributed to the financial crisis of 2007-2009.

The interbank market has historically operated ________.

The passage of the Financial Reform Law of 2010 changed The Federal Deposit Insurance Corporation (FDIC)protection of bank deposit accounts from the previous $250,000 to $100,000 per account.This was seen as an attempt to instill market discipline on depositors.

Which of the following repealed the last vestiges of 1930s financial markets regulations?

Securitization tends to strengthen the link between borrower and lender by encouraging continuous monitoring behavior by the lender.

From 1990 to 2007,securitized loans in the United States grew from ________.

A (an)________ is a financial intermediation device designed to allow banks to create off-balance sheet investment entities that "borrow short" and "lend long".

Many loan agreements with banks have market disruption clauses that allow banks to actually charge corporate borrowers their "real cost of funds," not just the published LIBOR.

LIBOR is an acronym for ________.

The authors suggest changes to several financial practices to remedy the global financial crisis.Discuss the authors' comments on the following items with regard to reducing the probability of and the severity of the effects of subsequent financial meltdowns: Debt,Securitization,Derivatives,Deregulation,and Illiquid Markets.