Week 3 Flashcards
A major controversy involving the banking industry in its early years was
whether the federal government or the states should charter banks.
The U.S. banking system is considered to be a dual system because
it is regulated by both state and federal governments.
Which of the following statements concerning bank regulation in the United States is TRUE?
The Federal Reserve and the state banking authorities jointly have responsibility for the state banks that are members of the Federal Reserve System.
A debit card differs from a credit card in that
a credit card is a loan while for a debit card purchase, payment is made immediately.
Adjustable rate mortgages
benefit homeowners when interest rates are falling.
Both ________ and ________ were financial innovations that occurred because of interest rate volatility.
adjustable-rate mortgages; financial derivatives
Financial innovations occur because of financial institutions search for
profits.
A financial innovation that developed as a result of banks avoidance of bank branching restrictions was
bank holding companies.
The large number of banks in the United States is an indication of
lack of competition within the banking industry.
Which of the following is a TRUE statement concerning bank holding companies?
Bank holding companies have experienced dramatic growth in the past three decades.
Allowing bank branching across state lines gives banks greater ability to coordinate bank operations. This makes it easier for them to receive the benefits of
economies of scale.
Bank consolidation will likely result in
increased competition.
The business term for economies of scope is
synergies.
A major difference between the United States and Japanese banking systems is that
Japanese banks are allowed to hold substantial equity stakes in commercial firms, whereas American banks cannot.
In a ________ banking system, commercial banks engage in securities underwriting, but legal subsidiaries conduct the different activities. Also, banking and insurance are not typically undertaken together in this system.
British-style universal
