Exam 9: Financial Crises

The Volcker rule ________.

When housing prices began to decline after their peak in 2006, many subprime borrowers found that their mortgages were "underwater." This meant that ________.

A ________ pays out cash flows from subprime mortgage-backed securities in different tranches, with the highest-rated tranch paying out first, while lower ones paid out less if there were losses on the mortgage-backed securities.

The housing price bubble ________.

Financial innovations that emerged after 2000 in the mortgage markets included all of the following except ________.

An economic downturn which causes the price level to fall and a deterioration in firms' net worth because of the increased burden of indebtedness results in ________.

Under the Montreal Accord, investors ________.

During the ABCP saga, The Bank of Canada ________.

A possible sequence for the three stages of a financial crisis in Canada might be ________ leads to ________ leads to ________.

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.

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.

Asymmetric information problems that act as a barrier to efficient allocation of capital are often described as ________.

An unanticipated decline in the price level increases the burden of debt on borrowing firms but does not raise the real value of borrowing firms' assets. The result is ________.

To reduce the incentives of financial institution managers to engage in excessive risk taking regulators might require that bonuses be ________.

The start of a recession or a stock market crash can result in ________.

Fitch and Standard & Poor announced downgrades on ________ of mortgage-backed securities and CDOs.

Share prices are a valuation of a corporation's ________.

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

The Dodd-Frank Act of 2010 ________.

The net stable funding ratio is the ratio of ________ and ideally should be relatively ________.