amer-8

Card Set Information

Author:
SAngell3
ID:
226699
Filename:
amer-8
Updated:
2013-07-11 12:58:37
Tags:
amer
Folders:

Description:
amer-8
Show Answers:

Home > Flashcards > Print Preview

The flashcards below were created by user SAngell3 on FreezingBlue Flashcards. What would you like to do?


  1. Most commercial banks in the United States are chartered by the federal government as national banks.

    a) True
    b) False
    b) False

    Most commercial banks in the United States are chartered by the states. Only one-third of commercial banks are chartered federally as national banks by the Comptroller of the Currency.
  2. Unit banking has grown rapidly in the past two decades.

    a) True
    b) False
    b) False

    Branch banking, rather than unit banking, has shown phenomenal growth in this period.
  3. Bank holding companies are often formed to diversify banking operations and enter new markets.

    a) True
    b) False
    a) True

    Bank holding companies are popular vehicles to avoid laws that prohibit branch banking and enter new areas.
  4. Commercial banks in the United States may turn to the Eurodollar market as a source of loanable funds when U.S. funds are more expensive.

    a) True
    b) False
    a) True  

    The Eurodollar market is an alternative source of funds for U.S. commercial banks. This serves as a safety valve when domestic funds are scarce and more expensive
  5. Commercial banks in the United States have extremely low failure rates due to extensive regulation and conservative management.

    a) True
    b) False
    a) True

    Less than 1 percent of U.S. banks fail each year, and there were only four total in 2004 out of an industry of nearly 7,700.
  6. New information-processing technology in commercial banking accelerates trends toward the consolidation of many smaller banks into fewer larger ones.

    a) True
    b) False
    a) True

    By substantially increasing fixed costs, technology investments require a large volume of transactions and encourage mergers to reap the benefits of low-cost production.
  7. Primary reserves of commercial banks include cash and deposits held with other banks.

    a) True
    b) False
    a) True

    By definition, a bank's primary reserves consist of cash and deposits held by other banks.
  8. Commercial banks hold a large amount of loan-backed securities such as government-guaranteed real estate mortgages.

    a) True
    b) False
    a) True  

    Banks hold large quantities of loan-backed securities. By the turn of the century mortgage-backed securities accounted for more than half of all investment securities held by U.S. banks.
  9. Corporate stock is a major component among the securities held by commercial banks to meet secondary reserve needs.

    a) True
    b) False
    b) False

    Current regulations forbid commercial banks from holding most types of corporate stock except for collateral and specialized equity classes.
  10. Term loans made by commercial banks usually mature in less than one year.

    a) True
    b) False
    b) False

    At the time of issue, term loans have a maturity date set for greater than one year.
  11. Home equity loans are a very slow-growing area in bank lending today.

    a) True
    b) False
    b) False

    Home equity loans where the interest costs may be tax deductible to the borrower, are one of the most dynamic and growing areas of loans.
  12. Demand-deposit accounts at commercial banks earn the highest rate of interest that banks pay.

    a) True
    b) False
    b) False

    Demand-deposit accounts do not earn the highest interest rates that banks pay. Time deposits normally offer the highest interest.
  13. The primary sources of commercial bank revenues are the interest and dividends paid on their holdings of securities.

    a) True
    b) False
    b) False

    Interest and fees on loans are the primary sources of commercial bank revenues.
  14. The legal reserves of commercial banks consist of vault cash and deposits at the Federal Reserve System.

    a) True
    b) False
    a) True

    Legal reserves of commercial banks, by definition, consist of cash in a bank's vault and deposits maintained at the Fed.
  15. A commercial bank creates money by making a loan when it has excess reserves.

    a) True
    b) False
    a) True

    To extend loans, a bank must have excess reserves. When making a loan, a bank accepts the borrower's I.O.U. and creates a demand deposit for the borrower. The newly created demand deposit increases the money supply.
  16. The creation of money by commercial banks supplements the supply of savings in the economy by providing additional funds for investment or consumption.

    a) True
    b) False
    a) True

    The supply of available funds for investment and consumption is supplemented by commercial banks: they create new money in the form of demand deposits when they make loans.
  17. The most important power of the Federal Reserve System is its authority to issue charters for new national banks.

    a) True
    b) False
    b) False

    The Comptroller of the Currency has the authority to issue charters for new national banks, not the Federal Reserve System. The Federal Reserve is responsible for examining and supervising the activities of all of its bank members.
  18. The Comptroller of the Currency is empowered to regulate all banks that are not members of the Federal Reserve System, particularly state-chartered banks.

    a) True
    b) False
    b) False

    The Comptroller of the Currency regulates only national banks. State banks are regulated by state banking commissions.
  19. The Glass-Steagall Act of 1933 allowed commercial banks to acquire and underwrite corporate stock..

    a) True
    b) False
    b) False

    It is precisely the acquiring and underwriting of corporate stock that Glass-Steagall did not permit.
  20. Under the Gramm-Leach-Bliley Act of 1999 the Federal Reserve became the umbrella regulator of all companies that own banks.

    a) True
    b) False
    a) True  

    The Federal Reserve serves as the umbrella regulator for all companies that own banks to ensure that their nonbank activities do not jeopardize the solvency of an insured bank.
  21. The Basel I agreements succeeded in their intent to become a global capital standard for international banking.

    a) True
    b) False
    b) False

    The Basel I agreements could not keep up with the rapid pace of innovation in banking, so a new set of guidelines known as Basel II was adopted in December 2007.
  22. Which of the following federal laws permitted financial-service providers to form financial holding companies (FHCs) offering banking, insurance, securities, and other services under one controlling corporation?  

    A) the Depository Institutions Deregulation and Monetary Control Act of 1980   
    B) the McFadden Act of 1927   
    C) the Garn-St. Germain Depository Institutions Act of 1982
    D) the Gramm-Leach-Bliley Act of 1999   
    D) the Gramm-Leach-Bliley Act of 1999   

    The others are incorrect because these laws do not pertain to the broad market of financial service provideers.
    (this multiple choice question has been scrambled)
  23. Which of the following has the power to charter national banks? 

    A) the Comptroller of the Currency   
    B) the Federal Reserve Board   
    C) the Federal Deposit Insurance Corporation   
    D) the Resolution Trust Corporation
    A) the Comptroller of the Currency   

    The others are incorrect because neither the Federal Reserve Board, the FDIC, nor the Resolution Trust Corporation can issue charters for new national banks, though all three agencies, as well as the Comptroller of the Currency, are involved in various aspects of bank regulation.
    (this multiple choice question has been scrambled)
  24. If the legal reserve requirement for demand deposits is 25 percent and a customer makes a $1,000 cash deposit to his checking account, which of the following statements is (are) correct?

    I. The bank's required reserve increased by $750.

    II. The ability of the bank to create new money increased by $750.   

    A) I only   
    B) II only   
    C) Both I and II   
    D) Neither I nor II
    • B) II only
    •    
    • I is incorrect because the bank's required reserves would rise by $250, or by 25 percent of the increase in deposits (.25 x $1,000).
  25. Which of the following statements concerning bank holding companies is (are) correct?

    I. Bank holding companies are nonfinancial business organizations that are owned by banks.

    II. Bank holding companies can offer services that banks themselves cannot offer.

    A) I only   
    B) II only   
    C) Both I and II   
    D) Neither I nor II
    B) II only  

    I is incorrect because bank holding companies are corporations organized to acquire and hold the stock of one or more banks.
     
    (this multiple choice question has been scrambled)
  26. All the following statements concerning the Federal Reserve System (the Fed) are correct EXCEPT   

    A) The Fed sets reserve requirements on transaction accounts.   
    B) The Fed supervises the activities of bank holding companies.   
    C) The Fed holds some of the legal reserves of the banking system.   
    D) The Fed has little control over the cost and availability of credit in the financial markets.
    D) The Fed has little control over the cost and availability of credit in the financial markets.

    The Fed can control the cost and availability of credit by changing reserve requirements, changing the discount rate, and engaging in open-market operations.
     
     
    (this multiple choice question has been scrambled)
  27. All the following statements concerning examples of different types of financial institutions are correct EXCEPT

    A) A commercial bank is an example of a depository financial institution.   
    B) A credit union is an example of a contractual financial institution.
    C) A pension fund is an example of a contractual financial institution.   
    D) A money market fund is an example of an investment financial institution.   
    B) A credit union is an example of a contractual financial institution.

    A credit union is an example of a depository financial institution, not a contractual financial institution.
     
    (this multiple choice question has been scrambled)
  28. Which of the following statements concerning the structure of banking in the United States is correct?

    A) The vast majority of banks are members of the Federal Reserve System. 
    B) Most banks are chartered by the federal government. 
    C) All national banks must be insured by the FDIC. 
    D) In recent decades there has been a steady trend toward unit banking.
    C) All national banks must be insured by the FDIC. 

    Most banks in the United States are chartered by the states. Less than half of the banks have elected to join the Federal Reserve System. The trend has been away from unit banking and toward branch banking.  
    (this multiple choice question has been scrambled)

What would you like to do?

Home > Flashcards > Print Preview