Question 1

To act in the taxpayer's interest and lower costs to the deposit insurance agency,regulators must

Accepted Answer

A)  set tight restrictions on holding assets that are too risky. 
B)  impose high capital requirements. 
C)  not adopt a stance of regulatory forbearance. 
D)  do all of the above. 
A)  set tight restrictions on holding assets that are too risky. 
B)  impose high capital requirements. 
C)  not adopt a stance of regulatory forbearance. 
D)  do all of the above. D

Question 2

The major provisions of the Competitive Equality in Banking Act of 1987 included

Accepted Answer

A)  expanding the responsibilities of the FDIC, which is now the sole administrator of the federal deposit insurance system. 
B)  establishing the Resolution Trust Corporation to manage and resolve insolvent thrifts placed in conservatorship or receivership. 
C)  directing the Federal Home Loan Bank Board to continue to pursue regulatory forbearance. 
D)  all of the above. 
E)  only A and B of the above. 
A)  expanding the responsibilities of the FDIC, which is now the sole administrator of the federal deposit insurance system. 
B)  establishing the Resolution Trust Corporation to manage and resolve insolvent thrifts placed in conservatorship or receivership. 
C)  directing the Federal Home Loan Bank Board to continue to pursue regulatory forbearance. 
D)  all of the above. 
E)  only A and B of the above. C

Question 3

Prior to August 1989,the agency that regulated the nation's savings and loan associations was the

Accepted Answer

A)  Federal Home Loan Bank Board. 
B)  Office of Thrift Supervision. 
C)  Resolution Trust Corporation. 
D)  Comptroller of the Currency. 
A)  Federal Home Loan Bank Board. 
B)  Office of Thrift Supervision. 
C)  Resolution Trust Corporation. 
D)  Comptroller of the Currency. A

Question 4

Thrifts suffered problems in the 1970s as

Accepted Answer

A)  market interest rates rose above the rates thrifts could pay on deposits and savings accounts. 
B)  thrift customers moved their funds from thrifts to money market mutual funds. 
C)  government regulators severely limited the scope of activities that thrifts could undertake to grow their way out of trouble. 
D)  all of the above occurred. 
E)  only A and B of the above occurred. 
A)  market interest rates rose above the rates thrifts could pay on deposits and savings accounts. 
B)  thrift customers moved their funds from thrifts to money market mutual funds. 
C)  government regulators severely limited the scope of activities that thrifts could undertake to grow their way out of trouble. 
D)  all of the above occurred. 
E)  only A and B of the above occurred.

Question 5

The major provisions of the Financial Institutions Reform,Recovery,and Enforcement Act of 1989 included

Accepted Answer

A)  reducing the regulatory responsibilities of the FDIC. 
B)  establishing the Resolution Trust Corporation to manage and resolve insolvent thrifts placed in conservatorship or receivership. 
C)  directing the Federal Home Loan Bank Board to continue to pursue regulatory forbearance. 
D)  all of the above. 
E)  only A and B of the above. 
A)  reducing the regulatory responsibilities of the FDIC. 
B)  establishing the Resolution Trust Corporation to manage and resolve insolvent thrifts placed in conservatorship or receivership. 
C)  directing the Federal Home Loan Bank Board to continue to pursue regulatory forbearance. 
D)  all of the above. 
E)  only A and B of the above.

Question 6

Credit unions' main source of funds is ________.

Accepted Answer

A)  regular share accounts 
B)  share certificates 
C)  share draft accounts 
D)  money market accounts 
A)  regular share accounts 
B)  share certificates 
C)  share draft accounts 
D)  money market accounts

Question 7

The congressionally imposed cap on the interest rate that S&Ls could pay on savings accounts became a serious problem for them in the 1970s when inflation rose.

Accepted Answer

A) True 
 B)False

Question 8

An analysis of the political economy of the savings and loan crisis helps one to understand

Accepted Answer

A)  why politicians hampered the efforts of thrift regulators, cutting regulatory appropriations and encouraging regulatory forbearance. 
B)  why thrift regulators were reluctant to admit that any problem even existed in the thrift industry. 
C)  why thrift regulators willingly acceded to pressures placed upon them by members of Congress. 
D)  all of the above. 
E)  only A and B of the above. 
A)  why politicians hampered the efforts of thrift regulators, cutting regulatory appropriations and encouraging regulatory forbearance. 
B)  why thrift regulators were reluctant to admit that any problem even existed in the thrift industry. 
C)  why thrift regulators willingly acceded to pressures placed upon them by members of Congress. 
D)  all of the above. 
E)  only A and B of the above.

Question 9

The major provisions of the Financial Institutions Reform,Recovery,and Enforcement Act of 1989 included

Accepted Answer

A)  abolishing the Federal Home Loan Bank Board and the FSLIC. 
B)  transferring the regulatory role of the Federal Home Loan Bank Board to the Office of Thrift Supervision, a bureau within the U.S. Treasury Department. 
C)  establishing the Resolution Trust Corporation to manage and resolve insolvent thrifts placed in conservatorship or receivership. 
D)  all of the above. 
E)  only A and B of the above. 
A)  abolishing the Federal Home Loan Bank Board and the FSLIC. 
B)  transferring the regulatory role of the Federal Home Loan Bank Board to the Office of Thrift Supervision, a bureau within the U.S. Treasury Department. 
C)  establishing the Resolution Trust Corporation to manage and resolve insolvent thrifts placed in conservatorship or receivership. 
D)  all of the above. 
E)  only A and B of the above.

Question 10

According to the text,the Competitive Equality in Banking Act of 1987

Accepted Answer

A)  turned the thrift industry around by providing the necessary funds to close the "zombie S&Ls." 
B)  lowered the cost of bailing out the S&Ls by quickly closing "zombie S&Ls" before they could cause other thrifts to fail. 
C)  failed to provide the funds necessary to close ailing S&Ls, and actually encouraged regulators to continue to pursue regulatory forbearance. 
D)  did both A and B of the above. 
A)  turned the thrift industry around by providing the necessary funds to close the "zombie S&Ls." 
B)  lowered the cost of bailing out the S&Ls by quickly closing "zombie S&Ls" before they could cause other thrifts to fail. 
C)  failed to provide the funds necessary to close ailing S&Ls, and actually encouraged regulators to continue to pursue regulatory forbearance. 
D)  did both A and B of the above.

Question 11

Savings and loans lost a total of $10 billion in 1981-1982 due to a combination of rising interest rates in 1979-1981 and

Accepted Answer

A)  the recession of 1981-1982 that reduced real estate prices enough to cause significant loan defaults. 
B)  the regulatory restrictions enacted by Congress in 1981 and 1982. 
C)  the loss of market share to commercial banks that were allowed to compete directly with thrifts in the real estate market. 
D)  the acceleration of inflation in 1981-1982 that caused thrifts to lose additional funds to money market mutual funds. 
A)  the recession of 1981-1982 that reduced real estate prices enough to cause significant loan defaults. 
B)  the regulatory restrictions enacted by Congress in 1981 and 1982. 
C)  the loss of market share to commercial banks that were allowed to compete directly with thrifts in the real estate market. 
D)  the acceleration of inflation in 1981-1982 that caused thrifts to lose additional funds to money market mutual funds.

Question 12

The Federal Home Loan Bank Board and the FSLIC,both of which failed in their regulatory tasks,were abolished by the

Accepted Answer

A)  Competitive Equality in Banking Act of 1987. 
B)  Financial Institutions Reform, Recovery, and Enforcement Act of 1989. 
C)  Office of Thrift Supervision. 
D)  Office of the Comptroller of the Currency. 
A)  Competitive Equality in Banking Act of 1987. 
B)  Financial Institutions Reform, Recovery, and Enforcement Act of 1989. 
C)  Office of Thrift Supervision. 
D)  Office of the Comptroller of the Currency.

Question 13

The government granted thrifts greater powers in the early 1980s in hopes of turning the industry's problems around.These powers

Accepted Answer

A)  required greater expertise in managing risk than many thrift managers possessed. 
B)  encouraged thrifts to expand lending rapidly in real estate, increasing their exposure to risk. 
C)  expanded the scope and complexity of thrift lending activities that went beyond what regulators could effectively monitor, given their limited resources. 
D)  did all of the above. 
E)  did only A and B of the above. 
A)  required greater expertise in managing risk than many thrift managers possessed. 
B)  encouraged thrifts to expand lending rapidly in real estate, increasing their exposure to risk. 
C)  expanded the scope and complexity of thrift lending activities that went beyond what regulators could effectively monitor, given their limited resources. 
D)  did all of the above. 
E)  did only A and B of the above.

Question 14

Federal legislation allows credit unions representing groups with different common bonds to merge into a single credit union.

Accepted Answer

A) True 
 B)False

Question 15

The bailout of the savings and loan industry was much delayed and,therefore,much more costly to taxpayers because

Accepted Answer

A)  regulators initially attempted to downplay the seriousness of problems within the thrift industry. 
B)  politicians who received generous campaign contributions from the savings and loan industry hoped that the problems in the industry would ease over time. 
C)  Congress did not wait long enough for many of the problems in the thrift industry to correct themselves. 
D)  of all of the above. 
E)  of only A and B of the above. 
A)  regulators initially attempted to downplay the seriousness of problems within the thrift industry. 
B)  politicians who received generous campaign contributions from the savings and loan industry hoped that the problems in the industry would ease over time. 
C)  Congress did not wait long enough for many of the problems in the thrift industry to correct themselves. 
D)  of all of the above. 
E)  of only A and B of the above.

Question 16

In the 1980s,regulators engaged in bureaucratic gambling when they allowed insolvent S&Ls to continue operating.

Accepted Answer

A) True 
 B)False

Question 17

The mutual form of ownership accentuates the principal-agent problem that exists in corporations.

Accepted Answer

A) True 
 B)False

Question 18

That taxpayers were poorly served by thrift regulators in the 1980s is now quite clear.This poor performance is explained by

Accepted Answer

A)  regulators' desire to escape blame for poor performance, leading to a perverse strategy of "regulatory gambling." 
B)  regulators' incentives to accede to pressures imposed by politicians, who sought to keep regulators from imposing tough regulations on institutions that were major campaign contributors. 
C)  Congress's unwillingness to appropriate sufficient funds to permit regulators to examine the many thrift institutions that needed monitoring. 
D)  all of the above. 
E)  only A and B of the above. 
A)  regulators' desire to escape blame for poor performance, leading to a perverse strategy of "regulatory gambling." 
B)  regulators' incentives to accede to pressures imposed by politicians, who sought to keep regulators from imposing tough regulations on institutions that were major campaign contributors. 
C)  Congress's unwillingness to appropriate sufficient funds to permit regulators to examine the many thrift institutions that needed monitoring. 
D)  all of the above. 
E)  only A and B of the above.

Question 19

Why have commercial banks gone to court in an effort to limit the activities of credit unions?

Accepted Answer

Commercial banks have gone to court in a

Question 20

In the early stages of the banking crisis in the 1980s,financial institutions were especially harmed by

Accepted Answer

A)  declining interest rates from late 1979 until 1981. 
B)  the severe recession in 1981-82. 
C)  the disinflation from mid-1980 to early 1983. 
D)  all of the above. 
A)  declining interest rates from late 1979 until 1981. 
B)  the severe recession in 1981-82. 
C)  the disinflation from mid-1980 to early 1983. 
D)  all of the above.

Exam 26: Savings Associations and Credit Unions

To act in the taxpayer's interest and lower costs to the deposit insurance agency,regulators must

The major provisions of the Competitive Equality in Banking Act of 1987 included

Prior to August 1989,the agency that regulated the nation's savings and loan associations was the

Thrifts suffered problems in the 1970s as

The major provisions of the Financial Institutions Reform,Recovery,and Enforcement Act of 1989 included

Credit unions' main source of funds is ________.

The congressionally imposed cap on the interest rate that S&Ls could pay on savings accounts became a serious problem for them in the 1970s when inflation rose.

An analysis of the political economy of the savings and loan crisis helps one to understand

The major provisions of the Financial Institutions Reform,Recovery,and Enforcement Act of 1989 included

According to the text,the Competitive Equality in Banking Act of 1987

Savings and loans lost a total of $10 billion in 1981-1982 due to a combination of rising interest rates in 1979-1981 and

The Federal Home Loan Bank Board and the FSLIC,both of which failed in their regulatory tasks,were abolished by the

The government granted thrifts greater powers in the early 1980s in hopes of turning the industry's problems around.These powers

Federal legislation allows credit unions representing groups with different common bonds to merge into a single credit union.

The bailout of the savings and loan industry was much delayed and,therefore,much more costly to taxpayers because

In the 1980s,regulators engaged in bureaucratic gambling when they allowed insolvent S&Ls to continue operating.

The mutual form of ownership accentuates the principal-agent problem that exists in corporations.

That taxpayers were poorly served by thrift regulators in the 1980s is now quite clear.This poor performance is explained by

Why have commercial banks gone to court in an effort to limit the activities of credit unions?

In the early stages of the banking crisis in the 1980s,financial institutions were especially harmed by

Why Study Financial Markets and Institutions?

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation?

Why Do Interest Rates Change?

How Do Risk and Term Structure Affect Interest Rates?

Are Financial Markets Efficient?

Why Do Financial Institutions Exist?

Why Do Financial Crises Occur and

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Stock Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

Banking Industry: Structure and Competition

The Mutual Fund Industry

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging with Financial Derivatives

Financial Crises In Emerging Market Economies

Finance Companies

Filters