Question 1

To act in the taxpayer's interest and lower costs to the deposit insurance agency, regulators must

Accepted Answer

A) set tight restrictions on holding assets that are too risky. 
B) impose high capital requirements. 
C) not adopt a stance of regulatory forbearance. 
D) do all of the above. 
A) set tight restrictions on holding assets that are too risky. 
B) impose high capital requirements. 
C) not adopt a stance of regulatory forbearance. 
D) do all of the above.

Question 2

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 3

The largest asset held by S&Ls is ________.

Accepted Answer

A) consumer loans 
B) securities 
C) mortgage loans 
D) consumer savings 
A) consumer loans 
B) securities 
C) mortgage loans 
D) consumer savings

Question 4

What factors contributed to creating the thrift crisis?

Accepted Answer

Several factors contributed to creating

Question 5

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.

Question 6

The major provisions of the Competitive Equality in Banking Act of 1987 included

Accepted Answer

A) abolishing the Federal Home Loan Bank Board and the FSLIC. 
B) transferring the regulatory role of the Federal Home Loan Bank Board to the Office of Thrift Supervision, a bureau within the U.S. Treasury Department. 
C) establishing the Resolution Trust Corporation to manage and resolve insolvent thrifts placed in conservatorship or receivership. 
D) all of the above. 
E) none of the above. 
A) abolishing the Federal Home Loan Bank Board and the FSLIC. 
B) transferring the regulatory role of the Federal Home Loan Bank Board to the Office of Thrift Supervision, a bureau within the U.S. Treasury Department. 
C) establishing the Resolution Trust Corporation to manage and resolve insolvent thrifts placed in conservatorship or receivership. 
D) all of the above. 
E) none of the above.

Question 7

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 8

Why did the Competitive Equality in Banking Act of 1987 fail to solve the problems in the thrift industry?

Accepted Answer

The Competitive Equality in Banking Act

Question 9

In the early 1990s, to replenish the reserves of the Savings Association Insurance Fund, insurance premiums for S&Ls were increased from ________ cents per $100 of deposits to ________ cents and can rise as high as 32.5 cents.

Accepted Answer

A) 12.5; 17.5 
B) 17.5; 20.5 
C) 20.8; 23.0 
D) 23.0; 27.8 
A) 12.5; 17.5 
B) 17.5; 20.5 
C) 20.8; 23.0 
D) 23.0; 27.8

Question 10

Explain why thrift regulators engaged in regulatory forbearance in the 1980s.

Accepted Answer

In the 1980s, thrift regulators engaged

Question 11

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

Accepted Answer

A) reducing the regulatory responsibilities of the FDIC. 
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) reducing the regulatory responsibilities of the FDIC. 
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 12

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 13

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 14

Since 1980, the number of credit unions has ________.

Accepted Answer

A) declined substantially 
B) remained steady 
C) increased substantially 
D) increased slightly 
A) declined substantially 
B) remained steady 
C) increased substantially 
D) increased slightly

Question 15

Credit unions' main type of loans is ________.

Accepted Answer

A) mortgages 
B) automobile 
C) credit cards 
D) nonresidential real estate 
A) mortgages 
B) automobile 
C) credit cards 
D) nonresidential real estate

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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 18

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

Accepted Answer

A) abolishing the Federal Home Loan Bank Board and the FSLIC. 
B) transferring the regulatory role of the Federal Home Loan Bank Board to the Office of Thrift Supervision, a bureau within the U.S. Treasury Department. 
C) expanding the responsibilities of the FDIC, which is now the sole administrator of the federal deposit insurance system. 
D) all of the above. 
E) only A and B of the above. 
A) abolishing the Federal Home Loan Bank Board and the FSLIC. 
B) transferring the regulatory role of the Federal Home Loan Bank Board to the Office of Thrift Supervision, a bureau within the U.S. Treasury Department. 
C) expanding the responsibilities of the FDIC, which is now the sole administrator of the federal deposit insurance system. 
D) all of the above. 
E) only A and B of the above.

Question 19

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 20

The policy of regulatory forbearance

Accepted Answer

A) meant delaying the closing of "zombie S&Ls" as their losses mounted during the 1980s. 
B) benefited "zombie S&Ls" at the expense of healthy S&Ls, as healthy institutions lost deposits to insolvent institutions. 
C) had the advantage of benefiting healthy S&Ls by giving them the opportunity to attract deposits that began to leave the "zombie S&Ls." 
D) did both A and B of the above. 
E) did both A and C of the above. 
A) meant delaying the closing of "zombie S&Ls" as their losses mounted during the 1980s. 
B) benefited "zombie S&Ls" at the expense of healthy S&Ls, as healthy institutions lost deposits to insolvent institutions. 
C) had the advantage of benefiting healthy S&Ls by giving them the opportunity to attract deposits that began to leave the "zombie S&Ls." 
D) did both A and B of the above. 
E) did both A and C of the above.

Exam 25: Savings Associations and Credit Unions

To act in the taxpayer's interest and lower costs to the deposit insurance agency, regulators must

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

The largest asset held by S&Ls is ________.

What factors contributed to creating the thrift crisis?

Thrifts suffered problems in the 1970s as

The major provisions of the Competitive Equality in Banking Act of 1987 included

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

Why did the Competitive Equality in Banking Act of 1987 fail to solve the problems in the thrift industry?

In the early 1990s, to replenish the reserves of the Savings Association Insurance Fund, insurance premiums for S&Ls were increased from ________ cents per $100 of deposits to ________ cents and can rise as high as 32.5 cents.

Explain why thrift regulators engaged in regulatory forbearance in the 1980s.

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

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

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

Since 1980, the number of credit unions has ________.

Credit unions' main type of loans is ________.

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

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

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

Savings and loan associations

The policy of regulatory forbearance

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

In the early 1990s, to replenish the reserves of the Savings Association Insurance Fund, insurance premiums for S&Ls were increased from cents per $100 of deposits to cents and can rise as high as 32.5 cents.