Question 1

Why have commercial banks gone to court in an effort to limit the activities of credit unions?

Accepted Answer

Commercial banks have gone to court in a

Question 2

Savings and loan associations

Accepted Answer

A) were established by Congress to encourage home ownership. 
B) initially were not permitted to accept demand deposits. 
C) held about 85 percent of their assets in the form of mortgages prior to the Great Depression. 
D) are all of the above. 
E) are only A and B of the above. 
A) were established by Congress to encourage home ownership. 
B) initially were not permitted to accept demand deposits. 
C) held about 85 percent of their assets in the form of mortgages prior to the Great Depression. 
D) are all of the above. 
E) are only A and B of the above.

Question 3

That several hundred S&Ls were not even examined once in the period January 1984 through June 1986 can be explained by

Accepted Answer

A) Congress's unwillingness to allocate the necessary funds to thrift regulators. 
B) regulators' reluctance to find the specific problem thrifts that they knew existed. 
C) prohibitions against onerous regulatory restrictions against S&Ls as mandated in the Competitive Equality in Banking Act. 
D) all of the above. 
E) only A and B of the above. 
A) Congress's unwillingness to allocate the necessary funds to thrift regulators. 
B) regulators' reluctance to find the specific problem thrifts that they knew existed. 
C) prohibitions against onerous regulatory restrictions against S&Ls as mandated in the Competitive Equality in Banking Act. 
D) all of the above. 
E) only A and B of the above.

Question 4

Which of the following is a lender of last resort for credit unions?

Accepted Answer

A) National Credit Union Administration 
B) U)S. Central Credit Union 
C) state central credit unions 
D) the Central Liquidity Facility 
A) National Credit Union Administration 
B) U)S. Central Credit Union 
C) state central credit unions 
D) the Central Liquidity Facility

Question 5

Prior to August 1989, the agency that regulated the nation's savings and loan associations was the

Accepted Answer

A) Federal Home Loan Bank Board. 
B) Office of Thrift Supervision. 
C) Resolution Trust Corporation. 
D) Comptroller of the Currency. 
A) Federal Home Loan Bank Board. 
B) Office of Thrift Supervision. 
C) Resolution Trust Corporation. 
D) Comptroller of the Currency.

Question 6

Mutual savings banks are the only financial institutions that are tax-exempt.

Accepted Answer

A) True 
 B)False

Question 7

Credit unions are characterized by

Accepted Answer

A) mutual ownership. 
B) common bond membership. 
C) nonprofit, tax-exempt status. 
D) all of the above. 
E) none of the above. 
A) mutual ownership. 
B) common bond membership. 
C) nonprofit, tax-exempt status. 
D) all of the above. 
E) none of the above.

Question 8

Since 1993, the number of savings and loan associations has ________.

Accepted Answer

A) held steady 
B) risen sharply 
C) risen slightly 
D) declined substantially 
A) held steady 
B) risen sharply 
C) risen slightly 
D) declined substantially

Question 9

Savings and loans lost a total of $10 billion in 1981-1982 due to a combination of rising interest rates in 1979-1981 and

Accepted Answer

A) the recession of 1981-1982 that reduced real estate prices enough to cause significant loan defaults. 
B) the regulatory restrictions enacted by Congress in 1981 and 1982. 
C) the loss of market share to commercial banks that were allowed to compete directly with thrifts in the real estate market. 
D) the acceleration of inflation in 1981-1982 that caused thrifts to lose additional funds to money market mutual funds. 
A) the recession of 1981-1982 that reduced real estate prices enough to cause significant loan defaults. 
B) the regulatory restrictions enacted by Congress in 1981 and 1982. 
C) the loss of market share to commercial banks that were allowed to compete directly with thrifts in the real estate market. 
D) the acceleration of inflation in 1981-1982 that caused thrifts to lose additional funds to money market mutual funds.

Question 10

The Federal Home Loan Bank Board and the FSLIC, both of which failed in their regulatory tasks, were abolished by the

Accepted Answer

A) Competitive Equality in Banking Act of 1987. 
B) Financial Institutions Reform, Recovery, and Enforcement Act of 1989. 
C) Office of Thrift Supervision. 
D) Office of the Comptroller of the Currency. 
A) Competitive Equality in Banking Act of 1987. 
B) Financial Institutions Reform, Recovery, and Enforcement Act of 1989. 
C) Office of Thrift Supervision. 
D) Office of the Comptroller of the Currency.

Question 11

The policy of ________ exacerbated ________ problems as savings and loans took on increasingly huge levels of risk on the slim chance of returning to solvency.

Accepted Answer

A) regulatory forbearance; moral hazard 
B) regulatory forbearance; adverse selection 
C) regulatory stringency; moral hazard 
D) regulatory stringency; adverse selection 
A) regulatory forbearance; moral hazard 
B) regulatory forbearance; adverse selection 
C) regulatory stringency; moral hazard 
D) regulatory stringency; adverse selection

Question 12

(I)S&Ls' net worth ratio is about the same as that of commercial banks. (II)Goodwill accounts for a majority of S&Ls' capital.

Accepted Answer

A) (I)is true, (II)false. 
B) (I)is false, (II)true. 
C) Both are true. 
D) Both are false. 
A) (I)is true, (II)false. 
B) (I)is false, (II)true. 
C) Both are true. 
D) Both are false.

Question 13

"Bureaucratic gambling" refers to

Accepted Answer

A) the belief of thrift managers that they would not be audited by thrift regulators in the 1980s due to the relatively weak bureaucratic power of the regulators. 
B) the risk that thrift regulators took in publicizing the plight of the S&L industry in the early 1980s. 
C) the strategy adopted by thrift regulators of lowering capital requirements and pursuing regulatory forbearance in the 1980s in the hope that conditions in the S&L industry would improve. 
D) none of the above. 
A) the belief of thrift managers that they would not be audited by thrift regulators in the 1980s due to the relatively weak bureaucratic power of the regulators. 
B) the risk that thrift regulators took in publicizing the plight of the S&L industry in the early 1980s. 
C) the strategy adopted by thrift regulators of lowering capital requirements and pursuing regulatory forbearance in the 1980s in the hope that conditions in the S&L industry would improve. 
D) none of the above.

Question 14

Charles Keating

Accepted Answer

A) was allowed to acquire Lincoln Savings and Loan of Irvine, California, even though he had been accused of fraud by the SEC only four-and-a-half years earlier. 
B) fired Lincoln's conservative lending officers and internal auditors, even though he had promised regulators he would keep them. 
C) enlisted the help of five senators to delay the seizure of Lincoln's assets. 
D) did all of the above. 
A) was allowed to acquire Lincoln Savings and Loan of Irvine, California, even though he had been accused of fraud by the SEC only four-and-a-half years earlier. 
B) fired Lincoln's conservative lending officers and internal auditors, even though he had promised regulators he would keep them. 
C) enlisted the help of five senators to delay the seizure of Lincoln's assets. 
D) did all of the above.

Question 15

The day-to-day liquidity needs of credit unions are met by the ________.

Accepted Answer

A) National Credit Union Administration 
B) Federal Reserve System 
C) state central credit unions 
D)  Central Liquidity Facility 
A) National Credit Union Administration 
B) Federal Reserve System 
C) state central credit unions 
D)  Central Liquidity Facility

Question 16

That taxpayers were poorly served by thrift regulators in the 1980s is now quite clear. This poor performance cannot be explained by

Accepted Answer

A) regulators' desire to escape blame for poor performance, leading to a perverse strategy of "regulatory gambling." 
B) regulators' incentives to accede to pressures imposed by politicians, who sought to keep regulators from imposing tough regulations on institutions that were major campaign contributors. 
C) Congress's dogged determination to protect taxpayers from the unsound banking practices of managers at many of the nation's savings and loans. 
D) any of the above. 
A) regulators' desire to escape blame for poor performance, leading to a perverse strategy of "regulatory gambling." 
B) regulators' incentives to accede to pressures imposed by politicians, who sought to keep regulators from imposing tough regulations on institutions that were major campaign contributors. 
C) Congress's dogged determination to protect taxpayers from the unsound banking practices of managers at many of the nation's savings and loans. 
D) any of the above.

Question 17

Since 1990, the number of credit union members has ________.

Accepted Answer

A) increased substantially 
B) increased slightly 
C) decreased substantially 
D) decreased slightly 
A) increased substantially 
B) increased slightly 
C) decreased substantially 
D) decreased slightly

Question 18

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

Accepted Answer

A) why politicians aided the efforts of thrift regulators, raising regulatory appropriations and encouraging the closing of insolvent thrifts. 
B) why thrift regulators were quick to inform Congress of the problems that existed in the thrift industry. 
C) why thrift regulators willingly acceded to pressures placed upon them by members of Congress. 
D) all of the above. 
A) why politicians aided the efforts of thrift regulators, raising regulatory appropriations and encouraging the closing of insolvent thrifts. 
B) why thrift regulators were quick to inform Congress of the problems that existed in the thrift industry. 
C) why thrift regulators willingly acceded to pressures placed upon them by members of Congress. 
D) all of the above.

Question 19

The major provisions of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 included

Accepted Answer

A) expanding the responsibilities of the FDIC, which is now the sole administrator of the federal deposit insurance system. 
B) establishing the Resolution Trust Corporation to manage and resolve insolvent thrifts placed in conservatorship or receivership. 
C) directing the Federal Home Loan Bank Board to continue to pursue regulatory forbearance. 
D) all of the above. 
E) only A and B of the above. 
A) expanding the responsibilities of the FDIC, which is now the sole administrator of the federal deposit insurance system. 
B) establishing the Resolution Trust Corporation to manage and resolve insolvent thrifts placed in conservatorship or receivership. 
C) directing the Federal Home Loan Bank Board to continue to pursue regulatory forbearance. 
D) all of the above. 
E) only A and B of the above.

Question 20

Thrifts suffered problems in the 1970s as

Accepted Answer

A) market interest rates rose above the rates thrifts could pay on deposits and savings accounts. 
B) thrift customers moved their funds from thrifts to money market mutual funds. 
C) government regulators severely limited the scope of activities that thrifts could undertake to grow their way out of trouble. 
D) all of the above occurred. 
E) only A and B of the above occurred. 
A) market interest rates rose above the rates thrifts could pay on deposits and savings accounts. 
B) thrift customers moved their funds from thrifts to money market mutual funds. 
C) government regulators severely limited the scope of activities that thrifts could undertake to grow their way out of trouble. 
D) all of the above occurred. 
E) only A and B of the above occurred.

Exam 25: Savings Associations and Credit Unions

Why have commercial banks gone to court in an effort to limit the activities of credit unions?

Savings and loan associations

That several hundred S&Ls were not even examined once in the period January 1984 through June 1986 can be explained by

Which of the following is a lender of last resort for credit unions?

Prior to August 1989, the agency that regulated the nation's savings and loan associations was the

Mutual savings banks are the only financial institutions that are tax-exempt.

Credit unions are characterized by

Since 1993, the number of savings and loan associations has ________.

Savings and loans lost a total of $10 billion in 1981-1982 due to a combination of rising interest rates in 1979-1981 and

The Federal Home Loan Bank Board and the FSLIC, both of which failed in their regulatory tasks, were abolished by the

The policy of ________ exacerbated ________ problems as savings and loans took on increasingly huge levels of risk on the slim chance of returning to solvency.

(I)S&Ls' net worth ratio is about the same as that of commercial banks. (II)Goodwill accounts for a majority of S&Ls' capital.

"Bureaucratic gambling" refers to

Charles Keating

The day-to-day liquidity needs of credit unions are met by the ________.

That taxpayers were poorly served by thrift regulators in the 1980s is now quite clear. This poor performance cannot be explained by

Since 1990, the number of credit union members has ________.

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

The major provisions of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 included

Thrifts suffered problems in the 1970s as

Why Study Financial Markets and Institutions

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation

Why Do Interest Rates Change

How Do Risk and Term Structure Affect Interest Rates

Are Financial Markets Efficient

Why Do Financial Institutions Exist

Why Do Financial Crises Occur and Why Are They so Damaging to the Economy

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Stock Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

Banking Industry: Structure and Competition

The Mutual Fund Industry

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging With Financial Derivatives

Finance Companies

Filters

The policy of exacerbated problems as savings and loans took on increasingly huge levels of risk on the slim chance of returning to solvency.