ECON 343 FINAL Flashcards
The legislation overturning the Glass-Steagall Act (i.e. part of the Banking Acts of 1933-1935 ) that separated commercial banking from investment banking is
the Gramm-Leach-Bliley Act (Banking Act of 1999).
The recent legislation that overturned the prohibition on interstate banking is
the Riegle-Neal Act (Banking Act of 1994)
What are the major causal factors of all modern U.S. financial crises?
all of the above
Which method of shutting down a bank has the greatest moral hazard?
purchase and assumption
Insolvent banks that were allowed to operate in the 1980s by banking authorities were called:
Zombie banks.
The originate-to-distribute business model has a serious ________ problem since the mortgage broker has little incentive to make sure that the mortgagee is a good credit risk.
principal-agent
Which of the following are types of conflict of interest in the financial markets?
All of the answers in this question
The national banking ERA was from:
1863-1914.
The Federal Board of Governors has_________ members.
7
The Federal Open Market Committee has_________ members.
12
________ is a process of bundling together smaller loans (like mortgages) into standard debt securities.
Securitization
The Federal Open Market Committee (FOMC) is composed of
presidents of 5 Federal Reserve regional banks and the seven Board of Governors.
The Basel Accord, an international agreement, requires banks to hold capital based on
risk-weighted assets.
With a 20% reserve requirement ratio, a $100 deposit into New Bank means that the maximum amount New Bank could lend is
$80.
Because of asymmetric information, the failure of one bank can lead to runs on other banks. This is the
contagion effect.
Both ________ and ________ are Federal Reserve assets.
securities; loans to financial institutions
The cost of financial crises around the world ranged from approximately ___________ to ___________ as a percent of GDP
3% to 57%
The regulatory function of the central bank began with the:
National Banking ERA.
Insolvent banks that were allowed to operate in the 1980s by banking authorities were called:
Zombie banks.
What do these dates in the U.S. have in common (1819,1837,1857,1873,1884,1893,1907, 1930-1933, 2007-2009)?
Financial panics that caused recessions
The legislation overturning the Glass-Steagall Act (i.e. part of the Banking Acts of 1933-1935 ) that separated commercial banking from investment banking is
the Gramm-Leach-Bliley Act (Banking Act of 1999).
The legislation that deregulated energy futures markets and credit default swaps was the:
Banking Act of 2000.
The legislation that established risk-based deposit insurance and attempted to limit the “too big to fail” rescues by the FED was the:
Banking Act of 1991 (FDICIA).
The legislation that began the ERA of Deregulation and phased out Regulation Q was:
Banking Act of 2000.
The mark-to-market accounting rule:
is true for all of the answers.
Banks evade regulatory requirements through:
all of the answers in this question.
The ________ that required separation of commercial and investment banking was repealed in 1999.
the Glass-Steagall Act.
Your instructor holds the view that the too big to fail risk:
is true for all of the answers.
In the early stages of the 1980s banking crisis, financial institutions were especially harmed by
the severe recession in 1981-82.
The National Bank Act of 1863, and subsequent amendments to it
established the Office of the Comptroller of the Currency.
The Glass-Steagall Act, before its repeal in 1999, prohibited commercial banks from
engaging in investment banking, underwriting and dealing of corporate securities.
Loophole mining refers to financial innovation designed to
get around regulations.
The belief that state bank failures were regularly caused by fraud or the lack of sufficient bank capital explains, in part, the passage of
the National Bank Act of 1863.
An analysis of the political economy of the savings and loan crisis helps one to understand
why thrift regulators willingly acceded to pressures placed upon them by members of Congress.
Which Banking ERA was intended to provide the federal government with a fiscal agent to conduct its official business?
First and Second Bank of the U.S. 1791-1836
Which Banking ERA established a system of well regulated nationally chartered banks?
National Banking Era (1863-1913)
Which Banking ERA is Ron Paul’s idealized world view?
Free Banking Era (1836-1863)
Which banking act provided the money and muscle to end the savings and loan crisis?
FIRREA (1989)
Which banking act allowed for full inter-state banking?
Banking Act of 1994
Which banking act deregulated over-the-counter derivatives and energy futures trading?
Banking Act of 2000 (Commodity Futures Modernization Act)
Which financial crisis was caused by a speculative bubble in high-technology stocks?
Dot-com 1997-2000
