Question 1

The Federal Reserve's Regulation Q

Accepted Answer

A) set maximum interest rates banks could pay on deposits. 
B) set minimum interest rates banks could pay on deposits. 
C) set maximum interest rates banks could charge on loans. 
D) discouraged disintermediation. 
A) set maximum interest rates banks could pay on deposits. 
B) set minimum interest rates banks could pay on deposits. 
C) set maximum interest rates banks could charge on loans. 
D) discouraged disintermediation.

Question 2

The principle underlying Treasury strips is that an investor will earn a higher interest rate when reinvestment risk is eliminated.

Accepted Answer

A) True 
 B)False

Question 3

A bank with a large credit-card customer base can market other financial products to these customers at a low cost. This is an example of

Accepted Answer

A) economies of scale. 
B) economies of scope. 
C) becoming a superregional bank. 
D) none of the above. 
A) economies of scale. 
B) economies of scope. 
C) becoming a superregional bank. 
D) none of the above.

Question 4

Regulations restricting branching have promoted the development of what two financial innovations?

Accepted Answer

A) bank consolidation and nationwide banking 
B) bank holding companies and automated teller machines 
C) money market mutual funds and sweep accounts 
D) reserve requirements and restrictions on interest paid on deposits 
A) bank consolidation and nationwide banking 
B) bank holding companies and automated teller machines 
C) money market mutual funds and sweep accounts 
D) reserve requirements and restrictions on interest paid on deposits

Question 5

An alternative corporate structure for U.S. banks that operate overseas is the Edge Act corporation, a special subsidiary engaged primarily in international banking.

Accepted Answer

A) True 
 B)False

Question 6

The existence of large numbers of banks in the United States indicates the presence of vigorous competition.

Accepted Answer

A) True 
 B)False

Question 7

A major controversy involving the U.S. banking industry in its early years was

Accepted Answer

A) whether banks should both accept deposits and make loans or whether these functions should be separated into different institutions. 
B) whether the federal government or the states should charter banks. 
C) what percent of deposits banks should hold as fractional reserves. 
D) whether banks should be allowed to issue their own bank notes. 
A) whether banks should both accept deposits and make loans or whether these functions should be separated into different institutions. 
B) whether the federal government or the states should charter banks. 
C) what percent of deposits banks should hold as fractional reserves. 
D) whether banks should be allowed to issue their own bank notes.

Question 8

Bank holding companies that have begun to rival the money center banks in size but whose headquarters are not based in one of the money center cities are called superregional banks.

Accepted Answer

A) True 
 B)False

Question 9

Are bank consolidations and nationwide banking good things? Why?

Accepted Answer

The answer of Are bank consolidations and nationwide banking good...

Question 10

The traditional financial intermediation role of banking has been to make ________-term loans and to fund them with ________-term deposits.

Accepted Answer

A) short; long 
B) long; short 
C) short; short 
D) long; long 
A) short; long 
B) long; short 
C) short; short 
D) long; long

Question 11

State banks that are not members of the Federal Reserve System are most likely to be examined by the

Accepted Answer

A) Federal Reserve System. 
B) Federal Deposit Insurance Corporation. 
C) Federal Home Loan Bank System. 
D) Comptroller of the Currency. 
A) Federal Reserve System. 
B) Federal Deposit Insurance Corporation. 
C) Federal Home Loan Bank System. 
D) Comptroller of the Currency.

Question 12

Burdensome regulations, along with inflation and rising interest rates, help to explain

Accepted Answer

A) the rapid pace of financial innovations in banking in the 1960s and 1970s. 
B) the low rate of bank failures in the 1980s. 
C) both A and B of the above. 
D) neither A nor B of the above. 
A) the rapid pace of financial innovations in banking in the 1960s and 1970s. 
B) the low rate of bank failures in the 1980s. 
C) both A and B of the above. 
D) neither A nor B of the above.

Question 13

When disintermediation occurs, the banking system ________ deposits and bank lending ________.

Accepted Answer

A) gains; increases 
B) gains; decreases 
C) loses; increases 
D) loses; decreases 
A) gains; increases 
B) gains; decreases 
C) loses; increases 
D) loses; decreases

Question 14

Which of the following is not expected to result from bank consolidation in the U.S.?

Accepted Answer

A) The disappearance of small community banks. 
B) The acceleration of the decline in the number of banks. 
C) Banks will be more efficient. 
D) Banks will be less likely to fail. 
A) The disappearance of small community banks. 
B) The acceleration of the decline in the number of banks. 
C) Banks will be more efficient. 
D) Banks will be less likely to fail.

Question 15

What is the key difference between an S&L and a mutual savings bank?

Accepted Answer

A) Mutual savings banks are jointly owned by depositors, whereas S&Ls aren't. 
B) The FDIC insures an S&L's deposits, but not those of mutual savings banks. 
C) Both A and B are correct. 
D) Neither A nor B is correct. 
A) Mutual savings banks are jointly owned by depositors, whereas S&Ls aren't. 
B) The FDIC insures an S&L's deposits, but not those of mutual savings banks. 
C) Both A and B are correct. 
D) Neither A nor B is correct.

Question 16

Before 1863,

Accepted Answer

A) the Federal Reserve System regulated only federally chartered banks. 
B) the Comptroller of the Currency regulated both state and federally chartered banks. 
C) the number of federally chartered banks grew at a much faster rate than at any other time since the end of the Civil War. 
D) none of the above occurred. 
A) the Federal Reserve System regulated only federally chartered banks. 
B) the Comptroller of the Currency regulated both state and federally chartered banks. 
C) the number of federally chartered banks grew at a much faster rate than at any other time since the end of the Civil War. 
D) none of the above occurred.

Question 17

Which of the following is not a reason for the disappointing revenue growth and profits of Internet-only banks?

Accepted Answer

A) high cost per transaction 
B) security concerns 
C) customer preferences 
D) technical problems 
A) high cost per transaction 
B) security concerns 
C) customer preferences 
D) technical problems

Question 18

The legislation that effectively prohibited banks from branching across state lines and forced all national banks to conform to the branching regulations of the state in which they reside is the

Accepted Answer

A) McFadden Act. 
B) National Banking Act. 
C) Glass-Steagall Act. 
D) Garn-St. Germain Act. 
A) McFadden Act. 
B) National Banking Act. 
C) Glass-Steagall Act. 
D) Garn-St. Germain Act.

Question 19

The Glass-Steagall Act prohibited commercial banks from

Accepted Answer

A) issuing equity to finance bank expansion. 
B) engaging in underwriting of and dealing in corporate securities. 
C) selling new issues of government securities. 
D) purchasing any debt securities. 
A) issuing equity to finance bank expansion. 
B) engaging in underwriting of and dealing in corporate securities. 
C) selling new issues of government securities. 
D) purchasing any debt securities.

Question 20

To eliminate the abuses of the state-chartered banks, the ________ created a new banking system of federally chartered banks, supervised by the ________.

Accepted Answer

A) National Banking Act of 1863; Office of the Comptroller of the Currency 
B) Federal Reserve Act of 1863; Office of the Comptroller of the Currency 
C) National Banking Act of 1863; Office of Thrift Supervision 
D) Federal Reserve Act of 1863; Office of Thrift Supervision 
A) National Banking Act of 1863; Office of the Comptroller of the Currency 
B) Federal Reserve Act of 1863; Office of the Comptroller of the Currency 
C) National Banking Act of 1863; Office of Thrift Supervision 
D) Federal Reserve Act of 1863; Office of Thrift Supervision

Exam 19: Banking Industry: Structure and Competition

The Federal Reserve's Regulation Q

The principle underlying Treasury strips is that an investor will earn a higher interest rate when reinvestment risk is eliminated.

A bank with a large credit-card customer base can market other financial products to these customers at a low cost. This is an example of

Regulations restricting branching have promoted the development of what two financial innovations?

An alternative corporate structure for U.S. banks that operate overseas is the Edge Act corporation, a special subsidiary engaged primarily in international banking.

The existence of large numbers of banks in the United States indicates the presence of vigorous competition.

A major controversy involving the U.S. banking industry in its early years was

Bank holding companies that have begun to rival the money center banks in size but whose headquarters are not based in one of the money center cities are called superregional banks.

Are bank consolidations and nationwide banking good things? Why?

The traditional financial intermediation role of banking has been to make ________-term loans and to fund them with ________-term deposits.

State banks that are not members of the Federal Reserve System are most likely to be examined by the

Burdensome regulations, along with inflation and rising interest rates, help to explain

When disintermediation occurs, the banking system ________ deposits and bank lending ________.

Which of the following is not expected to result from bank consolidation in the U.S.?

What is the key difference between an S&L and a mutual savings bank?

Before 1863,

Which of the following is not a reason for the disappointing revenue growth and profits of Internet-only banks?

The legislation that effectively prohibited banks from branching across state lines and forced all national banks to conform to the branching regulations of the state in which they reside is the

The Glass-Steagall Act prohibited commercial banks from

To eliminate the abuses of the state-chartered banks, the ________ created a new banking system of federally chartered banks, supervised by the ________.

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

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

Savings Associations and Credit Unions

Finance Companies

Filters

The traditional financial intermediation role of banking has been to make -term loans and to fund them with -term deposits.

When disintermediation occurs, the banking system deposits and bank lending .

To eliminate the abuses of the state-chartered banks, the created a new banking system of federally chartered banks, supervised by the .