Slides 5-7 Flashcards
The year 1907 saw a ___, and an bank/organization called the ___ went bankrupt.
An unsettled, declining market, budget crisis in NYC and economic fallout in San Fransisco (earthquake). The Knickerbocker Trust, fear of a Ponzi scheme.
In 1908, the ___ Commission led by ___ was created; the plan called for a ___ Association. The secret meeting was held at ___.
National Monetary Commission, Nelson Aldrich, National Reserve Association, Jekyll Island.
A key event leading to America’s financial reform was the election of ___ in ___, who opposed ‘Money Trusts’ or any plan which concentrates control in the hands of banks. In response, suggested to him was the ___ proposal, which called for the creation of twenty or more regional reserve banks.
Woodrow Wilson, 1912, Glass-Willis Proposal
The Federal Reserve Act of ___, “Provided for the establishment of Federal Reserve Banks, to furnish an ___ currency, to afford the means of ___ ___ ___, to establish a more effective supervision of banking in the US”
1913, elastic, re-discounting commercial paper
A “haircut” is synonymous with ___.
Re-discounting commercial paper (e.g. putting up a $100 collateral IOU to support a discount window loan or $98 or a 2% ‘haircut’
The Reserve Bank Organization Committee (Act) would designate no less than ___ but no more than ___ cities to be federal reserve cities, and then divide the nation into ___.
No less than eight, but no more than twelve, districts
William McAdoo was ___ in the ___ District, who with Agriculture Seceretary David Houston believed that European central banks should deal with the Federal Reserve System as ___.
Treasury Secretary, New York, as a whole rather than with just one of its parts.
The 1st President (Governor) of the FRBNY was ___ in ___. And the 1st Chairman of the Fed Reserve Board was ___ from ___ to ___ (prior he was the Assistant ___).
Benjamin Strong, 1914, Charles Hamlin from 1914 to 1916, prior he was the Assistant Secretary of Treasury
There was a bank rush in the 1930s. FDR passed the ___ Banking Act, which opened banks according to class. Class A banks were ___, Class B banks were ___, and Class C were ___.
Emergency Banking Act, Solvent, Endangered/Weakened, Insolvent/Not Allowed Open
The Glass-___ Act of ___ banned commercial banks from ___ and also established the ___.
Steagall Act of 1933, Underwriting Securities, FDIC
Eccles proposed ___ to relieve ___ and direct relief measures such as ___, ___, and ___.
Public Works, Relive Unemployment, Minimum Wage, Unemployment Insurance, and Old Age Pensions
A.P. Giannini (Good Looking Guy) opened the Bank of ___, and became the first to offer services to the ___-class rather than simply the ___-class. He supported ___ and the ___ Act, which ___ the Fed Reserve
Italy and then America, Middle-Class vs Upper-Class. Marriner Eccles, Banking Act of 1935, Reorganized
Eccles sponsored the ___ Act of ___. The support of ___ was key to the passage of this act, and FDR appointed ___ as Chairman of the Fed.
Banking Act of 1935, Giannini, Eccles
The Banking Act of 1935 eliminated the requirement for the ___ and ___ to serve on the Board and shifted power from ___ to ___.
Secretary of the Treasury and Comptroller, From the Reserve Banks to the Board of Governors
In 1936 the Federal Reserve increased Reserve Requirements as an approach to ___ a portion of the ___ of excess reserves, but indicated that easy policy would continue.
Sterilize, Abundance
After WWII, the concern was to prevent a return of the Depression and high unemployment. However, the primary postwar problem turned out to be ___. The Treasury’s position was commitment to bond holders who lent money during WWII, not let bonds trade below par. The Fed’s position was that interest rate ceilings were tantamount to ___.
An Inflation Problem, Monetarizing the Federal Debt
Thomas ___, Eccles and Sproul pressed for a ___ of the interest rate peg, arguing that inflationary pressure would ___ war financing.
McCabe, Relaxation, Undermine
The Fed Chairman between 1951-1970 was William ___, credited for negotiating ___, who defended the right of the Fed to take action that would sometimes conflict with ___ desires.
McChensey, Negotiating The Accord, Presidential
Post-Accord, Fed Chairman Martin favored a “___” approach to Open Mkt Operations. Sproul and others opposed this, favoring buying Treasury coupons in addition to Bills. Who prevailed?
Bills-Only, Martin prevailed
Arthur Burns served as ___ to Eisenhower, who was appointed as ___. The common criticism of Burns was that he appeared to support ___ at the expense of ___.
Economic Advisor, Chairman of the Fed, Growth at the Expense of Containing Inflation
Paul ___ was appointed as Chairman of the Fed in 1979. Under him, the Fed took an aggressive stand against ___.
Volcker, Run-Away Inflation
During the Volcker’s tenure as Chairman, ___ and ___ eased.
Inflation and Inflation Expectations
The Greenspan Years were referred to as ___.
The Great Moderation
The Great Moderation was caused by: (1)___ and (2)___. By (1), achieving low and more stable ___ and by (2) better alignment between ___ and ___.
Monetary Policy, Inventory Management, Low and More Stable Inflation and by Better Alignment Between Output and Final Demand
Greenspan aruged faster ___ growth implied faster potential ___growth, also implied slower growth of ___ and ___, also implied lower ___.
Productivity Growth, Potential GDP Growth, Unit Labor Costs and Inflation, NAIRU.
The McFadden Act ___ across ___. This was a pro-___ policy.
Prohibited banking across state lines, pro-competitive
The Glass-Steagall Act prohibited ___, established the ___, separated “___” from “___” and established ___ on savings and time deposits.
Prohibited interest on demand deposits, Established FDIC, Separated “Banking” from “Investment Banking”, Established interest rate ceilings on savings and time deposits
The Depository Institutions Deregulation and Monetary Control Act of 1980 established ___, phased-out ___, permitted ___, and allowed ___.
Established uniform required reserve ratios for depository institutions, Phrased-out interest rate ceilings, Permitted NOW accounts at depository institutions, Allowed thrifts to make consumer loans and issue credit cards
The Depository Institutions Act of 1982 (Garn-St. Germain) allowed ___ and gave ___.
Allowed possibility of interstate banking and inter-institutional mergers, Gave thrifts authority to make some commercial loans
The Interstate Banking and Branching Efficiency Act of 1994 (Reigle-Neal Act) permitted ___ and required ___.
Permitted banks to acquire and merge with out-of-state banks, effectively repealing the 1927 McFadden Act, Required banks to make loans to all elements of the community including inter-city and poor communities
The Financial Services Modernization Act of 1999 (Gramm-Leach-Bliley) allowed ___.
Allowed holding companies to own commercial banks, investment banks, and insurance affiliates (basically rolled back Glass-Steagall Act of 1933)
A component of the Wall Street Reform and Consumer Protection Act—Dodd-Frank was to incorporate the ___.
Volcker Rule
The Dodd-Frank Act created the ___.
Financial Stability Oversight Council
The Volcker rule is a ___ of the 2010 Dodd-Frank financial regulatory overhaul, and it effectively banned ___, and was designed to be a modern-day version of the ____.
The Volcker rule is a cornerstone of the 2010 Dodd-Frank financial regulatory overhaul, and it effectively bans what’s called proprietary trading—when a bank invests its own funds in order to make a profit. Modern-day version of the Glass-Steagall Act.
The Glass-Steagall Act separated ___ from ___.
The Glass-Steagall separated investment banks, which buy and sell securities for their own accounts and on behalf of clients, from commercial banks, which make loans.
The four main commercial bank regulators are the ___, ___, ___ and ___.
Federal Reserve, FDIC, Comptroller of the Currency, State Banking Authorities
Via the CAMELS rating system, banks with ratings of 1 or 2 represent ___ and those with 3, 4, or 5 present ___.
1 or 2 present few, if any, supervisory concerns, Banks with ratings of 3, 4, or 5 present moderate to extreme degrees of supervisory concern.
Another word for core capital is ___.
Leverage
Sensitivity to market risk includes factor such as ___, ___, ___ and ___.
Gap Interest Sensitivity Assets vs Liabilities, Changing Credit Risk Exposure, Diversification of Assets, Duration Risk
