Test 3- Chapter 18 Bank Regulation

Question 1

Which act does this describe?

separated banking and securities activities, FDIC was introduced, prohibited interest on checking

Answer 1

Glass-Steagall Act

Question 2

What is a bank run?

Answer 2

when people run to banks in masses to close their accounts

Question 3

Why did bank runs happen?

Answer 3

severe economic crisis
banks failing in gloves
no depository insurance

Question 4

Which act does this describe?
first major deregulation of banking industry

phaseout of deposit rate ceilings under Regulation Q

allowance of NOW(checking acct that pays interest) accounts for all depository institutions

new lending flexibility for depository institutions

increased FDIC insurance form $40,000 to $100,000

Answer 4

DIDMCA of 1980

Question 5

The reason they created the DIDMCA:
banks profitability was sinking, competition was increasing because people started using money market mutual funds, which was a pooling of money together to invest in short term products. So banks wanted to be able to do what?

Answer 5

be able to create new products

more flexibility in who they could lend to

Question 6

Which act does this describe?
allowed banks to offer Money market deposit accounts with no interest ceiling and permitted acquisition of failing banks across state lines

Answer 6

Garn- St. Germain Act

Question 7

the reason the garn-st. germain act was created is because:
banks wanted to be able to compete with the money market mutual funds so they created money market deposit accounts. banks thought that since they were insured more people would prefer to purchase the deposit accounts versus the mutual funds. Unfortunately?

Answer 7

the mutual funds were pretty safe as well

Question 8

Why was the Garn-St Germain Act important for the growth of banks?

Answer 8

liquidating banks was so disruptive to economy, so it helped banks who wanted to expand across state lines

Question 9

Which act does this describe:
lifted interstate banking restrictions
restricted bank ownership to maximum 10% of countries deposits

Answer 9

Reigle-neal act

Question 10

The Reigle-Neal act was essentially a forward thinking act, because they didn’t want, what created?

Answer 10

monopolies

Question 11

Which act does this describe:

allowed consolidation of banks, securities firms, and insurance companies

Answer 11

financial services modernization act

Question 12

Which act did the financial services modernization act do away with?

Answer 12

glass-steagal

Question 13

Did banks want the financial services modernization act

Answer 13

yes

Question 14

After the recession, lots of insurance companies sold off their bank aspects because they didn’t want what?

Answer 14

such heavy regulation, especially on the insurance side of their business

Question 15

What did the financial services modernization act allow in the 2000s and up?

Answer 15

lots of different products

Question 16

Which act does this describe:
tightens mortgage origination rules, requires ownership stake in mortgage backed securities if bank sells them

created financial stability oversight council

created an orderly liquidation plan

consumer financial protection bureau

Volker rule

concentration limit

Answer 16

Dodd Frank act

Question 17

in the recession, many big banks got bailed out by the?

Answer 17

discount window from the Fed with super low interest rates

Question 18

How many members does the Financial Stability Oversight Council consist of?

Answer 18

10 members form financial industries

Question 19

what does the financial stability oversight council do?

Answer 19

recommend safer practices

Question 20

Which part of the Dodd Frank act does this describe:
investigates consumer complaints, enforces laws, supervises banks, certain lenders, credit cards, and mortgage brokers

also made $250,000 deposit insurance permanent

Answer 20

consumer financial protection bureau

Question 21

Which part of the Dodd Frank act does this describe:

bans proprietary trading, limits bank investment in hedge funds and private equity

Answer 21

Volker rule

Question 22

did banks want the Volker rule?

Answer 22

no

Question 23

Why did the government create the Volker rule?

Answer 23

government doesn’t want big banks to fail, and thinks they will fail using esoteric risky investments. If the bank losses deposit money to make risky investments and then proceeds to loss depositors money, this means banks have to pay those depositors.

Question 24

Which part of the dodd frank act does this describe:
restricts banks ownership to 10% of all liabilities (includes deposits) in all financial system. Banks can grow organically, but need to hold more capital. Banks cannot merge if they are above the threshold without the Fed’s approval.

Answer 24

concentration limit

Question 25

Global Bank Regulations are capital requirements, what are the name of the uniform requirements among countries

Answer 25

Basel I,II, III

Question 26

with regards to the global bank regulations :
there are differing ______ of capital based on risk level

capital requirements have _________ globally since the 2008 financial crisis

Sets bank capital

Riskier banks required to have _____ capital

Answer 26

tiers
increased
more

Question 27

with regards to the US regulatory system, there are many regulators but _____ oversight

Answer 27

poor

Question 28

How might reintroducing the Glass-Steagall Act make banks safer today?

Answer 28

banks wouldn’t be able to take on such risky investments

Question 29

Why did regulators lift the bank on interstate banks?

Answer 29

didn’t want banks to fail, more cost-effective to have banks taken over than liquidated

gov wanted to grow economy

stupid to have a bank operating in only one state

Question 30

Why can’t anyone bank dominate at US market

Answer 30

restrictions to 10%