1. A banking panic like the one that occurred in 1930s is not likely to happen a
ID: 1221037 • Letter: 1
Question
1. A banking panic like the one that occurred in 1930s is not likely to happen again because:
A. depositors are no longer allowed to withdroaw their funds simultaneously B. the glass-seagall act that separated commercial and investment banking was replaced C. The Riegle-Neal Act was passed to prohibit nationwide banking D. None of the answers are correct
2. When the FDIC uses the purchase and assumption method:
A. it advertises the deal two weeks before revoking the bank charter B. It pays off depositors and closes the failed bank C. It usually tries to close the failed bank on a friday afternoon so that it can reopen on Monday morning D. small depositors lose 75 percent their deposits
3. everything else being the same, a bank that pays large dividends to stockholders might be ____ its capital, causing its CAMELS rating to ____
A. deleting; improve B. deleting; get worse C. increasing; improve D. increasing; get worse
4. The treasury department helped keep the banking system______ during the finnacial crisis by _______
A. liquid; providing equity B. liquid; increasing deposit insurance C. solvent; injecting capital D. solvent; closing insovent banks
5. Which of the following statements about structured investment vehicles (SIVs) is true?
A. the primary purpose of SIVs was to increase capital requirements B. Before the 2007-2009 crisis, SIVs created a steady stream of profits for sponsoring banks C. SIVs were completely independent from the banks that created them D. SIVs are safer than US treasury bonds
6. A bank has failed when the following occurs: I. it must sell its assets at fire-sale prices II. Its liabilities exceed its assets III. It faces a liquidity crisis
A. I only B. II only C. I and II only D. I, II, and III
7. Deposit insurance creates a moral hazard because it:
A. eliminate depositors's incentives to monitor banks B. reduces the cost of a bank failure for depositors C. encourages depositors to leave their funds in a weak bank
D. all of the answers are correct
8. Structured investment vehicles ran into difficulty in the financial crisis of 2007-2009 when:
A. the SIVs became independent companies B. they were not able to roll over their debt C. banks brought the SIVs onto their balance sheet D. the U.S goverment refused to provide it with assistance under the Trouble Asset Relief Program
Explanation / Answer
1) (a) depositers are nolonger allowed to withdroaw their fund simultanously.
2.(b) It plays off depositers and closes the failedback
3.(c) Increasing;improve
4.(c) Solvent;injecting capital
5.(a) The primary purpose of SIVs was to increase capital requirement.
6(d)1 2 AND 3
7(A) Eliminate depositers incentives to monitor bank
8(c) banks brought the SIVs into their balance sheet
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