Exam 15: Comparative Analysis of Financial Institutions and Their Operations

The growing importance of nonbank financial institutions in the economy and financial system is due to their:

The result of the federal legislation passed during the 1980s is that savings associations:

What solutions have been developed to deal with the savings and loan industry's problems? Do these actual and proposed solutions seem reasonable to you?

Credit Unions in the United States make more loans to households (individuals and families) than do commercial banks.

A Collateralized Mortgage Obligation (CMO) is one vehicle used by S&Ls to securitize loans.

All savings banks are stockholder-owned corporations.

The early S&Ls were managed and directed by:

Credit unions are not permitted to make loans to each other.

A mutual savings and loan association, technically, is owned by its depositors.

Due to their vulnerability to interest rate "mismatch", the thrift industry uses derivative contracts extensively to hedge its risk.

The three leading consumer installment lending institutions in the United States, arrayed in order from most important to least important, are:

A growing number of savings and loans are converting to:

Stronghold Money Fund Assets is a relatively new money market fund with about $400 million in total financial assets and shares outstanding (each maintained at a value of $1.00 per share). Most of the fund's accounts represent the savings of high-income, interest-sensitive financial market investors. Stronghold's current distribution of financial assets currently is as follows: Interest rates are expected to rise substantially in the money market over the next several weeks or months and Stronghold's management is concerned that its relatively low current yield (a seven-day average of 4.05 percent, one of the lowest yields among existing money funds) may result in the loss of many of its more interest-sensitive share accounts. The fund's average maturity is currently at 34 days, also substantially less than the industry's current average maturity of about 45 days. What steps would you recommend to help Stronghold Money Fund prepare for an apparent impending change in the money fund's condition?

Which of the following is (are) true about subprime lending?

The U.S. government has authorized the agencies regulating S&Ls to use more regulatory forbearance today than in the past.

Money market funds are insured by an agency of the U.S. government.

Most money market funds charge their customers a front-end load when a new account is opened or additional shares are purchased.

Why has the savings and loan industry been in trouble in recent years?

Money market funds face no competitive disadvantages relative to other depository institutions.

As of 2009, total financial assets and liabilities held by U.S. credit unions was approximately $816 billion.