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.
What terms does this describe:
bank takes more risk when they are protected from losses
moral hazard
Nonprofit, serve members, federal or state, deposit-like institutions
credit unions
Credit unions mindset & framework is much different than a normal bank because they really want to serve their members. Why is this?
because it’s not for profit
Who owns credit unions?
depositors
Credit unions try to give you the ______ rates for deposits and the ______ rates for loans.
highest
lowest
in order to be apart of a credit union you have to have what?
common bond: part of same firm, club, group
Is there corporate tax on credit unions?
no
because there’s no taxes on credit unions, they have the ability to do what?
charge lower rates on loans and offer higher deposit rates than bans
Can u get essentially the same products at a credit union as you could at a bank?
yes some names are different, checking accounts are share-draft accounts
What are the sources of funds in Credit Unions?
deposits, retained earnings, central liquidity facility (similar to discount window)
What are uses of funds in Credit Unions?
loans to members, mortgages, government securities
Which group does this describe:
supervise and regulate all federally chartered Credit Unions
insures 90% of all Credit unions, including federal charters
state chartered credit unions can be regulated by state or by this group, and receive alternate insurance
national credit union administration
are credit union risks higher or lower than savings institutions?
lower
If you default who are you hurting in a credit union?
other members
What is the liquidity risk in a CU
low-high
what is the credit risk CU
low
what is the interest rate risk in a CU
low-mod
