Exam 14: Regulating the Financial System

The FDIC used to charge all banks the same rate for insurance on deposits.From what you have learned, what problems did this create for not only the FDIC but for well run banks?

The government regulates bank mergers, sometimes denying the proposed merger.Often the reason given for the denial is to protect small investors.What are small investors being protected from?

Credit Unions are regulated by a combination of agencies which includes:

The reason that a run on a single bank can turn into a bank panic that threatens the entire financial system is:

If the lender of last resort function of the government is to be effective in working to minimize a crisis, it must be:

The text points out that there is an inverse relationship between the fiscal cost of a bank crisis and real GDP growth.What are some of the reason that can explain this inverse relationship?

Besides regulating banks, the government also regulates nondepository financial institutions, such as insurance companies.Consider a property casualty insurance company; why would the government need to regulate them?

If we lived in an economy where interest rates were highly volatile, would you expect the maximum asset to capital ratio that a regulator would allow to increase or decrease and why?

The government's role of lender of last resort is directed to:

The financial system is inherently more unstable than most other industries due to the fact that:

Recession can cause widespread bank crises for all of the following reasons except:

You are the head of finance for a very large corporation located in a relatively small town.At a local chamber of commerce meeting, the president of the local bank asks you why you keep the corporation's bank accounts in a very large mid-western bank and not in his local bank.From a risk reduction perspective, how could you answer his question?

What is the difference between a bank that is insolvent and one that is illiquid?

Deposit insurance only seems to be viable at the federal level.This is likely due to the fact that:

All of the following are true about deposit insurance except:

Identify at least two problems a borrower would face if banks were not required to disclose the information that they are currently required to make available.

What three strategies are employed by government officials to ensure that the risks created by the government safety net are contained?

In the ten years after the FDIC limit was increased to $100,000:

You have two savings accounts at an FDIC insured bank.You have $225,000 in one account and $40,000 in the other.If the bank fails, you will receive:

Deflation can cause widespread bank crises for all of the following reasons except: