ECON 10.4

11) Congress introduced deposit insurance in response to A) the savings-and-loan crisis of the 1980s. B) the banking crisis of the 1930s. C) the demise of the Second Bank of the United States in 1836. D) the demise of the First Bank of the United States in 1811.

B) the banking crisis of the 1930s.

10) National banks are chartered by the A) Office of the Comptroller of the Currency. B) Office of Bank Supervision. C) Securities and Exchange Commission. D) Office of Management and the Budget.

A) Office of the Comptroller of the Currency.

4) Which of the following is NOT an example of off-balance-sheet lending? A) a swap B) a standby letter of credit C) a loan commitment D) a loan sale

A) a swap

28) As of 2016, the bank portion of TARP A) earned a profit of $30 billion. B) earned a profit of $245 billion. C) cost $266 billion. D) cost $700 billion.

A) earned a profit of $30 billion.

30) A financial contract in which a bank agrees to sell the expected future returns from an underlying bank loan to a third party is referred to as A) loan sale. B) loan commitment. C) credit rationing. D) microlending.

A) loan sale.

25) Small business loans are ________ to securitize than are mortgage loans and are ________ to securitize than are balances on credit cards. A) more difficult; more difficult B) more difficult; easier C) easier; more difficult D) easier; easier

A) more difficult; more difficult

23) Geographic restrictions on banks A) reduce their ability to take advantage of economies of scale. B) raise the costs of their providing risk-sharing, liquidity, and information services. C) reduce their exposure to credit risk. D) reduce the amount of local lending they undertake.

A) reduce their ability to take advantage of economies of scale.

21) Where do the FDIC's funds come from? A) Congress appropriates money for the FDIC, just as it does for other federal agencies. B) The FDIC earns income through the insurance premiums paid by insured banks and from investment earnings. C) The FDIC sells bonds in the financial markets. D) The FDIC relies on voluntary contributions from the banking community.

B) The FDIC earns income through the insurance premiums paid by insured banks and from investment earnings.

7) Standby letters of credit A) are a form of swaps. B) are a promise by a bank to lend the borrower funds to pay off its maturing commercial paper. C) are a promise by a large depositor to provide additional funds to a bank should the bank face an unexpectedly large deposit outflow. D) represent the unused balance on a bank credit card.

B) are a promise by a bank to lend the borrower funds to pay off its maturing commercial paper.

26) Community banks often charge ________ interest rates on business loans than do large banks, and the interest rates charged by community banks are usually ________ than the interest rates on credit cards. A) higher; higher B) higher; lower C) lower; higher D) lower; lower

B) higher; lower

12) A bank run involves A) a failure by a bank to get the maximum return on its investments. B) large numbers of depositors withdrawing their deposits within a short period of time. C) a bank being forced out of business. D) fraud on the part of a bank's managers.

B) large numbers of depositors withdrawing their deposits within a short period of time.

5) What is the primary reason for the differences between the U.S. banking system and those in other major industrial countries? A) Economies of scale are greater in banking in the United States than in banking in other countries. B) legislation that led to the development of state and national banks C) the Federal Reserve System D) the National Bank

B) legislation that led to the development of state and national banks

17) During a banking panic, a lender of last resort will A) purchase banks which are having difficulty but appear sound. B) make loans to solvent but temporality illiquid banks. C) make loans to insolvent but liquid banks. D) make loans to any banks which request them.

B) make loans to solvent but temporality illiquid banks.

8) Securitization refers to A) changing the mix in a financial portfolio away from stocks and toward bonds. B) selling directly to investors loans or securities that were formerly held by financial intermediaries. C) banks insisting that collateral be supplied on previously unsecured loans. D) reducing the exposure of a bank's portfolio to interest rate risk.

B) selling directly to investors loans or securities that were formerly held by financial intermediaries.

31) Which of the following is a name for when a bank promises to lend funds to a borrower to pay off its commercial paper? A) loan commitment B) standby letter of credit C) securitization D) loan sale

B) standby letter of credit

20) If you have $2 million in a CD at a commercial bank that is a member of the FDIC, how much of your funds are uninsured? A) $0 B) $1 million C) $1.75 million D) $2 million

C) $1.75 million

19) Currently, the FDIC insures deposits up to a limit of A) $1,000. B) $100,000. C) $250,000. D) $1,000,000.

C) $250,000.

14) The Federal Reserve System was created in A) 1836. B) 1863. C) 1913. D) 1945.

C) 1913.

15) The FDIC was created in A) 1863. B) 1913. C) 1934. D) 1991.

C) 1934.

2) As of 2016, about how many banks were there in the United States? A) 57 B) 2,200 C) 5,000 D) 14,200

C) 5,000

3) By 2015, what share of U.S. assets were held by the 10 largest banks in the United States? A) 10% B) 29% C) 53% D) 68%

C) 53%

1) Banks in the United States have been prohibited from investing deposits in significant equity holdings since the passage of the A) Bank Reform Act of 1980. B) Securities and Exchange Acts of 1933 and 1934. C) National Banking Acts of 1863 and 1864. D) Sherman Antitrust Act of 1890.

C) National Banking Acts of 1863 and 1864.

18) In the current U.S. economy, who plays the role of lender of last resort? A) The Securities and Exchange Commission B) The Federal Deposit Insurance Corporation C) The Federal Reserve System D) The Social Security Administration

C) The Federal Reserve System

6) The United States has a dual banking system in the sense that A) the public may deposit money in either commercial banks or savings-and-loan associations. B) banks offer both demand deposits and time deposits to savers. C) banks are chartered by the federal government and by state governments. D) banks both take in deposits and make loans.

C) banks are chartered by the federal government and by state governments.

27) The Bank of Bird-in-Hand is a(n) ________ bank which concentrates on making loans to ________. A) commercial; large businesses B) investment; large business C) community; small businesses D) community; individual households for mortgages.

C) community; small businesses

24) From the peak before the financial crisis, lending to small businesses by the largest banks has A) increased by about 25%. B) remained unchanged. C) declined by about 40%. D) virtually stopped.

C) declined by about 40%.

9) What are federally chartered banks called? A) federal banks B) Federal Reserve banks C) national banks D) central banks

C) national banks

16) The McFadden Act of 1927 A) separated commercial banking from investment banking. B) put a tax on the issuance of bank notes by state banks. C) prohibited national banks from operating branches outside their home states. D) established the Federal Reserve System.

C) prohibited national banks from operating branches outside their home states.

13) The Federal Reserve System was created in response to A) the stock market crash of 1929. B) the ending of the Civil War. C) the banking panic of 1907. D) difficulties of the free-banking era.

C) the banking panic of 1907.

22) States that restrict banks to having a single branch are said to require A) mono banking. B) nonbank banking. C) unit banking. D) semi-banking.

C) unit banking.

29) Using statistical models to estimate the maximum losses a portfolio's value is likely to sustain over a particular time period is called A) gap analysis. B) duration analysis. C) value-at-risk approach. D) credit-risk analysis.

C) value-at-risk approach.