Chap 2

How will increasing capital requirements at large commercial banks benefit depositors, stockholders, and society in general? a. Depositors benefit as it reduces the likelihood of failure and deposit runs b. Society benefits as safe banks are more likely to lend c. Stockholders benefit from a safer investment d. All of these are benefits of increasing capital requirements. e. None of these are benefits of increasing capital requirements.

d. All of these are benefits of increasing capital requirements.

The Helping Families Save Their Homes Act of 2009 included provisions: a. intended to prevent mortgage foreclosures. b. to enhance the availability of mortgage credit. c. to protect renters living in foreclosed homes. d. All of these are correct. e. Only "intended to prevent mortgage foreclosures" & "to enhance the availability of mortgage credit" are correct

d. All of these are correct.

Which of the following is not a fundamental function of the Federal Reserve? a. Conduct the nation's monetary policy. b. Provide an effective payments system. c. Regulate banking operations. d. Ensure bank profitability. e. All of these are fundamental functions of the Federal Reserve.

d. Ensure bank profitability.

What entity is the receiver of failed institutions? a. OCC b. US Treasury c. Federal Financial Institutions Examination Council (FFIEC) d. FDIC

d. FDIC

Which of the following is the most flexible of the Fed's tools for implementing monetary policy? a. Changes in the fed funds rate b. Changes in the required reserve ratio c. Changes in the discount rate d. Open market operations e. Private placements

d. Open market operations

The primary appeal of online banking is: a. prevention of identity theft. b. high-volume traffic. c. lack of face-to-face interaction. d. its convenience. e. the ability to make small dollar purchases.

d. its convenience.

Savings and loans have historically specialized in: a. commercial loans. b. auto loans. c. mutual loan. d. real estate loans. e. demand deposit accounts.

d. real estate loans.

Which of the following is a way that a OBHC differs from a MBHC? a. A OBHC controls only one bank, while MBHC control at least two banks. b. A OBHC controls more than one bank, while MBHCs control only one bank. c. A OBHC controls no more than two holding companies, while MBHCs control at least two commercial banks. d. The motivation behind a OBHC is to combine the bank's capabilities with the financial activities of their non-bank subsidiaries, but the motivation behind a MBHC is different.

a. A OBHC controls only one bank, while MBHC control at least two banks.

Which of the following typically offer a complete set of banking services including loans, deposits, and money management/trust services? a. Branch Banking b. Automated Teller Machines c. Internet (Online) Banking d. Call Centers e. Mobile Banking

a. Branch Banking

Which of the following is not represented in the CAMELS ratings. a. Cash adequacy b. Asset quality c. Management quality d. Liquidity e. Sensitivity to market risk.

a. Cash adequacy

The _________ authorized money market deposit accounts. a. Depository Institutions Act (Garn-St. Germain) b. Competitive Equality Banking Act c. Financial Institutions Reform, Recovery and Enforcement Act d. Federal Deposit Insurance Corporation Improvement Act e. Depository Institutions Deregulation and Monetary Control Act

a. Depository Institutions Act (Garn-St. Germain)

The primary federal regulator of state banks that are not members of the Fed is the: a. FDIC. b. Office of the Comptroller of the Currency. c. Office of Thrift Supervision. d. state banking department. e. National Credit Union Administration.

a. FDIC.

Which of the following is not a purpose of bank regulation? a. Guarantee minimal profitability of the banking system. b. Provide monetary stability. c. Ensure safety and soundness of banks. d. Provide a competitive financial system. e. Protect consumers from abuses by banks.

a. Guarantee minimal profitability of the banking system.

Which of the following mortgage types were offered to "subprime" borrowers? a. Interest only and Option Adjustable-Rate b. Interest Only c. Principal Only d. All of these.

a. Interest only and Option Adjustable-Rate

Which of the following officially designates a bank as insolvent? a. Office of the Comptroller of the Currency b. Federal Reserve c. Office of Thrift Supervision d. Office of National Charters e. Resolution Trust Corporation

a. Office of the Comptroller of the Currency

The _________ allows adequately capitalized bank holding companies to acquire banks in any state. a. Riegle-Neal Interstate Banking and Branching Efficiency Act b. Competitive Equality Banking Act c. Financial Institutions Reform, Recovery and Enforcement Act d. Federal Deposit Insurance Corporation Improvement Act e. Depository Institutions Deregulation and Monetary Control Act

a. Riegle-Neal Interstate Banking and Branching Efficiency Act

Which of the following allows depository institutions to borrow for a fixed term against a variety of collateral that is normally accepted for discount window loans? a. Term Auction Facility b. Term Securities Lending Facility c. Primary Dealer Credit Facility d. Troubled Asset Relief Program e. Housing and Economic Recovery Facility

a. Term Auction Facility

Which of the following is false regarding community banks? a. They typically have extensive operations in specific regions of the country. b. They typically operate in a limited geographic area. c. They often focus on lending to small businesses. d. The bulk of their funding comes from deposits. e. They tend to grow at a modest rate.

a. They typically have extensive operations in specific regions of the country.

The _________ authorized the Treasury to purchase debt securities issued by the Fannie Mae, Freddie Mac, and the Federal Home Loan Banks and to purchase common stock. a. Treasury Emergency Authority Provisions b. Foreclosure Prevention Act c. Troubled Asset Relief Program d. Primary Dealer Credit Facility e. Check 21 Act

a. Treasury Emergency Authority Provisions

Which of the following institutions' customers have a "common bond"? a. credit union b. commercial bank c. mortgage company d. savings bank e. thrift

a. credit union

The _________ expanded the FDIC's authority for open bank assistance. a. Depository Institutions Act (Garn-St. Germain) b. Competitive Equality Banking Act c. Financial Institutions Reform, Recovery and Enforcement Act d. Federal Deposit Insurance Corporation Improvement Act e. Depository Institutions Deregulation and Monetary Control Act

b. Competitive Equality Banking Act

The Federal Deposit Insurance Reform Act of 2005 created which of the following? a. Bank Insurance Fund b. Deposit Insurance Fund c. Savings Association Insurance Fund d. National Credit Union Shares Insurance Fund e. Federal Savings and Loan Insurance Fund

b. Deposit Insurance Fund

Which of the following is the receiver of a failed depository institution? a. Federal Reserve b. Federal Deposit Insurance Corporation c. Office of the Comptroller of the Currency d. Office of Thrift Supervision e. Federal Savings and Loan Insurance Corporation

b. Federal Deposit Insurance Corporation

The primary federal regulator of state banks that are members of the Fed is the: a. Resolution Trust Corporation b. Federal Reserve c. Office of the Comptroller of the Currency d. State Banking Authorities. e. Federal Deposit Insurance Corporation.

b. Federal Reserve

The _________ repealed the Glass-Steagall Act. a. Riegle-Neal Interstate Banking and Branching Efficiency Act b. Gramm-Leach-Bliley Act c. Financial Institutions Reform, Recovery and Enforcement Act d. Federal Deposit Insurance Corporation Improvement Act e. Depository Institutions Deregulation and Monetary Control Act

b. Gramm-Leach-Bliley Act

What is the primary goal of a commercial bank? a. Max. loan portfolio assets. b. Max. shareholders' wealth. c. Min. bad loan reserves. d. Max. Total assets.

b. Max. shareholders' wealth.

Which legislated act makes it illegal to discrimination against a borrower on the basis of race, sex, age, marital status, national origin, or religion (equal credit opportunity)? a. Regulation A b. Regulation B c. Regulation E d. Regulation Q

b. Regulation B

Which of the following loans Treasury securities to primary dealers in exchange for other securities held by the dealers? a. Term Auction Facility b. Term Securities Lending Facility c. Primary Dealer Credit Facility d. Troubled Asset Relief Program e. Housing and Economic Recovery Facility

b. Term Securities Lending Facility

Subprime loans are... a. mortgage loans. b. loans made to borrowers with low credit scores and a higher-than-average risk of default. c. loans made to borrowers with high credit scores and lower-than-average risk of default. d. loans made to borrowers with low credit scores and a lower-than-average risk of default.

b. loans made to borrowers with low credit scores and a higher-than-average risk of default.

Deposit insurance was increased to __________ per depositor in 2008. a. $100,000 b. $150,000 c. $250,000 d. $300,000 e. $500,000

c. $250,000

Which of the following type of investments is reported in Shareholders' Equity? a. Held-to-Duration securities b. Held-to-Maturity securities c. Available-for-sale securities d. Trading account securities

c. Available-for-sale securities

The _________ created the Office of Thrift Supervision. a. Depository Institutions Act (Garn-St. Germain) b. Competitive Equality Banking Act c. Financial Institutions Reform, Recovery and Enforcement Act d. Federal Deposit Insurance Corporation Improvement Act e. Depository Institutions Deregulation and Monetary Control Act

c. Financial Institutions Reform, Recovery and Enforcement Act

A new charter to start a federal savings association is obtained from the: a. Office of the Comptroller of the Currency. b. National Credit Union Administration. c. Office of Thrift Supervision. d. State banking department. e. Federal Reserve

c. Office of Thrift Supervision.

Which of the following is NOT a primary objective of regulation? a. Ensure the safety and soundness of the financial system. b. Provide an efficient and competitive financial system. c. Prevent bank failures. d. Provide monetary stability. e. Protect consumer of financial services from abuses.

c. Prevent bank failures.

Which of the following is an overnight collateralized loan facility that provides loans for up to 120 days to primary dealers in exchange for a broad range of collateral? a. Term Auction Facility b. Term Securities Lending Facility c. Primary Dealer Credit Facility d. Troubled Asset Relief Program e. Housing and Economic Recovery Facility

c. Primary Dealer Credit Facility

The _________ created a fund originally designed to allow the U.S. Treasury to purchase distressed assets from financial institutions. a. Capital Purchase Program b. Foreclosure Prevention Act c. Troubled Asset Relief Program d. Primary Dealer Credit Facility e. Check 21 Act

c. Troubled Asset Relief Program

Federal Reserve Reg. ____ requires disclosure of as to why a costumer was denied credit. a. AA b. BB c. Z d. C e. B

c. Z

A formal regulatory document that prescribes corrective action for a problem institution is called a: a. cease and desist order. b. capital request. c. memorandum of understanding. d. quality assurance directive. e. national bank order.

c. memorandum of understanding.

Bank regulations: a. can prevent bank failures. b. can eliminate economic risk for banks. c. serve as guidelines for sound operating policies. d. guarantee bankers will make sound management decisions. e. guarantee bankers act in an ethical manner.

c. serve as guidelines for sound operating policies.

Commercial banks mostly specialize in: a. mortgages. b. mutual loans. c. short-term business credit. d. savings accounts. e. share draft accounts.

c. short-term business credit.

Currently, the Fed sets the discount rate __________ the target fed funds rate. a. 1% - 1.5% below b. 2% - 2.5% below c. 3% - 3.5% above d. 2% - 2.5% above e. 1% - 1.5% above

e. 1% - 1.5% above

Savings institutions must maintain what percent of their assets in housing-related assets to be considered a "Qualified Thrift Lender"? a. 100% b. 15% c. 70% d. 85% e. 65%

e. 65%

Federal Reserve Reg. ____ makes it illegal for any lender to discriminate on the basis of national origin. a. AA b. BB c. Z d. C e. B

e. B

The lack of incentive to guard against risk where one is protected from it is known as: a. risk aversion b. too big to fail c. protection guarantee d. incentive failure e. moral hazard

e. moral hazard