Group 1 SVB Summary

41) Sweep accounts A) have made reserve requirements nonbinding for many banks. B) sweep funds out of deposit accounts into long-term securities. C) enable banks to avoid paying interest to corporate customers. D) reduce banks' assets. 42) Since 1974, commercial banks importance as a source of funds for nonfinancial borrowers A) has shrunk dramatically, from around 40 percent of total credit advanced to around 25 percent by 2011. B) has shrunk dramatically, from around 70 percent of total credit advanced to below 50 percent by 2011. C) has expanded dramatically, from around 50 percent of total credit advanced to above 70 percent by 2011. D) has expanded dramatically, from around 30 percent of total credit advanced to above 50 percent by 2011. 43) Thrift institutions importance as a source of funds for borrowers A) has shrunk from around 40 percent of total credit advanced in the late 1970s to below 30 percent by 2011. B) has shrunk from over 20…

At the beginning of the mortgage crisis, 2006-2009 recession, some investment banks like Goldman Sachs, were allowed to change their banking charters from an investment bank to a commercial bank (like Citibank), O A. To have access to the Federal Reserve Discount Window O B. To be able to borrow money at low interest rates from the Federal Reserve Bank O C. To avoid bankruptcy O D. All of the above

Which of the following statements is NOT CORRECT regarding Saving & Loan Associations (S&Ls) before securitization Group of answer choices S&Ls might not have enough money to fund an entire home. S&Ls were raising money through short-term floating-rate deposits, but making loans in the form of long-term fixed-rate mortgages. When interest rates increased, S&Ls faced crisis because they had to pay more to depositors than they collected from mortgagees. S&Ls had legal resources to collect mortgage payments from borrowers.

QUESTION 10 Why are some banks considered too big to fail?   A. The Glass-Steagal Act prohibits the failure of any bank wiht more than $5 billion in assets   B. Very large banks have enough assets to prevent financial distress and cannot fail   C. These banks are so large that their failure may initiate a financial crisis in the broader economy   D. Congress has always stepped in to bail out banks owned by politically connected individuals

Class book:  Fundamentals of Corporate Finance by Brealey, Myers, and Marcus The Financial Crisis.  True or False a. The financial crisis was largely caused by banks taking large positions in the options and futures markets. b. The prime cause of the financial crisis was an expansion in bank lending for the overheated commercial real estate market. c. Many subprime mortgages were packaged together by banks for resale as mort-gage-backed securities. d. The crisis could have been much more serious if the government had not stepped in to rescue Merrill Lynch and Lehman Brothers. e. The crisis in the eurozone finally ended when other eurozone countries and the IMF provided a massive bailout package to stop Greece from defaulting on its debts.

Which of the following was NOT a direct and major consequence of the 2007-2009 U.S. Subprime Financial Crisis? Group of answer choices   a. Small consumer and household savers lost all their money they had in savings accounts due to the failure of many smaller FDIC member banks   b. Many people lost their homes when they could no longer make their payments after their subprime mortgage rates reset to a much higher rate after two years   c. Lehman suffered a major financial collapse and ultimately was dissolved after many of its remaining parts were purchased by Barclays and Nomura, among others   d. The U.S. stock markets dropped dramatically as the credit fueled economy of the mid-2000s started to suffer after the credit bubble began to burst.

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Select all that are true regarding credit risk for a bank. O This risk is an estimate of future uncollectibility that results in a provision expense on the bank's income statement. O Changes in the business cycle affect all firms the same, so credit risk is pro-cyclical. O Despite it's significance to banks, the housing market is a small part of the economy and has little effect elsewhere so there is no impact to credit risk. Material changes in the housing market impacts banks and their credit risk significantly due to the relative size of the mortgage portfollos. O Business cycles create variations in this risk, but affect each borrower differently.

Which of the following did NOT help trigger the subprime crisis in 2007? Housing prices stopped climbing and actually started falling around 2006   Borrowers were offered teaser loans like 2/28 to get them into loans they could not otherwise qualify for   Mortgage brokers were required by Sarbanes Oxley to personally pledge that all the loan information provided on loan applications was correct and they could be held personally responsible for any losses due to fraud   Banks made loans to borrowers with very questionable income by using “liar loans”

Which one is not an incentive for a bank to securitize its mortgage loans? Reduce insurance premium paid to FDIC Meet the regulations on equity capital adequacy Increase the duration of the bank's asset portfolio Reduce the bank's illiquidity exposure hich one is not an incentive for a bank to Securitize its mortgage loans? A Reduce insurance premium paid to FDIC B Meet the regulations on equity capital adequacy Increase the duration of the bank's asset portfolio Reduce the bank's illiquidity exposure

Our textbook claims that one of the key services banks provide is maturity intermediation: what exactly does this mean?  (Choose an answer from the list below; only one is correct.) Reference:  Chapter 11 and/or Chapter 1    Banks borrow money from their younger customers and lend it to their older customers. Banks gather small deposits and use them to make large investments, allowing small investors to collectively buy large assets. Banks are funded with deposits that they promise to return on demand but use them to make long-term loans, which creates a mismatch in the maturities of their assets & liabilities.

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Deposit Insurance a. depositor indifference generates a moral hazard problem that encourages banks to engage in risky activities b. exists only in the USA, not in the oer countries. c. It is a privately owned insurance company. d. successfully helped US to overcome the problems in 1980's S&L crisis and 2008 Financial Crisis.

hich one is not an incentive for a bank to Securitize its mortgage loans? A) Reduce insurance premium paid to FDIC B Meet the regulations on equity capital adequacy Increase the duration of the bank's asset portfolio D Reduce the bank's illiquidity exposure

18- which of the statements given below is false? Please select one; a) a financial intermediary borrows funds from people who have saved b) in a bull market stock prices are rising on average c) interest rates can be accurately described as the rental price of money d) a stock is a debt security that promises to make periodic payments for a specific period of time e) banks are financial intermediaries that accept deposits and make loans

Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.