Test 3- Chapter 21: Thrift Operations Flashcards
relatively small financial institutions that focus primarily on the mortgage market
savings institutions
what are the two types of savings institutions
savings banks and savings and loans
Are SI’s FDIC insured?
yes
What are some examples of savings institutions?
schwab, USAA, E*trade, citizens bank
What are the two kinds of ownership in SI
stock and mutually owned
Most SI’s are ______ owned
stock
IF the SI is ______ owned:
depositors own
profit gets passed on to depositors
get bonus checks at the end of the year
mutually
Who regulates SI?
Office of Comptroller of currency & state, depends on charter
FDIC
What are the sources of funds in SI?
deposits (NOW, Money mkt deposit acct, CDS)
borrowed funds (fed funds, discount window, repos)
capital (retained earnings, issue new stock)
What are the main uses of funds for SIs?
cash (reserves)
mortgages( issue their own and purchase others; MBS)
Other securities: treasuries, corporate debt
Loans: consumer, commercial, credit card
repos, fed funds
What is the liquidity risk for SIs?
moderate, but can borrow quickly
What is the credit risk for SIs?
low-high, depending on market, default-risk
What is the interest rate risk for SIs?
moderate- high historically
This describes what?
poor management, fraud, loan losses due to real estate slowing, 1,000 failures, loss $160 billion
SI crisis
Who did real estate contribute to the SI crisis?
SI started to get into real estate because it was a tax break, therefore encouraging real estate development. So developers built business buildings, but no one wanted to buy them so developers started to default on big loans. The FSIC which insured SI, went out of business as a result of this. Taxpayers had to bail out these banks in the 1980s. Savings banks offered higher and higher interest rates to attract people, and then banks went and took super risky investment. All apart of bad government regulation.