Deck 21: Thrifts and Finance Companies

Question 1

How did Killinger revolutionize the thrift industry and make Washington Mutual "more retail than banking"?

A)A lesser range of debt instruments was offered than at traditional thrifts.
B)Credit was granted to people who would not typically qualify for it.
C)More commercial loans were made than at traditional thrifts.
D)Larger loans were emphasized but were made only to those who could afford them.

Answer 1

B

Question 2

In what year were credit unions included in an expansion of the Small Business Administration, allowing them to make federal government-subsidized Small Business Administration loans to small businesses that qualified?

A)1934
B)1964
C)1998
D)2003

Answer 2

D

Question 3

Savage's Provident Institution for Savings was based on which of the following principles?

A)To help the poor and working class help themselves through savings
B)T o fund loans and create "a bank for savings" for the poor
C)To provide payments during times of illness
D)To help the poor and working class by providing very high interest on any savings they might make

Answer 3

A

Question 4

The number of credit unions increased across the United States after the passage of the __________ Act.

A)Federal Home Loan Bank
B)Massachusetts Credit Union
C)Depository Institutions Deregulation and Monetary Control
D)Federal Credit Union

Question 5

The very first savings banks, created in the late 1700s and early to mid-1800s, were meant to serve what function?

A)The first savings banks were focused on middle-class and wealthy families.
B)The first savings banks were an attempt to provide financial services to poor and working-class families.
C)The first savings banks operated like savings and loans, providing a place to save and a way to fund the building of homes for the poor.
D)The first savings banks offered little on savings but charged high interest on loans.

Question 6

Why were many Building & Loan associations organized along ethnic lines?

A)Many immigrants  preferred to save their money in institutions that lent money to people who were like them.
B)Building & Loan associations reminded immigrants of home.
C)More than other people, immigrants had problems repaying loans.
D)Building & Loan associations did not allow immigrants from other ethnic groups to join.

Question 7

Which of the following are two significant differences between thrifts and credit unions?

A)Credit unions cater to wealthier depositors and are nonprofit; thrifts are for-profit and serve the working class.
B)Thrifts are based on a common bond among depositors and cater to more middle class and wealthy savers.
C)Credit unions are nonprofit and are owned by their members, or depositors, but thrifts are generally for-profit and have a wide variety of depositors.
D)Thrifts are tax-exempt, but credit unions are not; credit unions have a wide variety of depositors.

Question 8

How did most Savings & Loans begin?

A)Federal Home Loan Bank System
B)Chartered banks
C)Thrifts
D)Building & Loan associations

Question 9

During the postwar boom, commercial banks were subject to interest rate ceilings under Regulation Q. Which of these is true of thrifts regarding Regulation Q?

A)Thrifts were initially unaffected by Regulation Q but subjected to the same regulations as commercial banks by 1950.
B)Thrifts were not affected by Regulation Q during the postwar boom.
C)Thrifts were allowed to provide slightly higher interest on deposits than commercial banks under Regulation Q.
D)Thrifts were limited to even lower interest rates for depositors than commercial banks could pay under Regulation Q.

Question 10

During the 1980s, instead of closing insolvent thrifts, the Federal Home Loan Bank Board regulators often ignored the problem, allowing the failed institutions to continue. How did these so-called zombie institutions infect healthy institutions?

A)Zombie institutions paid high interest rates to attract savers, forcing healthy institutions to raise their rates as well.
B)Zombie institutions offered loans with high interest rates; healthy institutions had to compete by doing the same.
C)Investors would move funds from the zombie banks into the healthy banks.
D)Managers would leave zombie institutions and get jobs at healthy banks.

Question 11

Credit unions first began in North America in which time period?

A)The early years of the nineteenth century
B)The early years of the twentieth century
C)Right after the Great Depression
D)In the 1950s

Question 12

Why would focusing on deposits from the working class make modern savings banks still relatively small?

A)Federal regulations limit the size of these institutions to better serve the poor.
B)The working class served by these institutions typically have a low savings rate.
C)The managers of these institutions tend to be more conservative in investing funds.
D)The FDIC will not insure deposits at a thrift institution.

Question 13

Savage's Provident Institution for Savings is known for all of the following except which one of these?

A)Provident in the early days promised greater dividends if the institution could afford it.
B)The early Provident paid depositors a 1% return quarterly.
C)The early Provident took savings year-round and returned them with interest at Christmas.
D)Provident in the early days was the first banking institution the poor and working class of the United States had that focused on their needs.

Question 14

The Garn-St. Germain Depository Institutions Act allowed Savings & Loans to

A)negotiate orders of withdrawal.
B)decrease their consumer lending.
C)increase their consumer lending.
D)collect interest on accounts.

Question 15

Commercial banks and thrifts claim that __________ gives credit unions an unfair advantage.

A)limiting membership to a common bond
B)not paying corporate income taxes
C)charging lower interest rates on loans
D)paying higher interest rates on deposits

Question 16

What was the goal of The Federal Home Loan Bank System?

A)To create a government-sponsored lender to thrifts that made consumer mortgage loans.
B)To increase the amount of high-cost funds available for home mortgage loans.
C)To reduce the amount of low-cost funds available to financial institutions.
D)To reduce the number of thrift institutions.

Question 17

The thrifts were hurt by growing inflationary pressures in the 1960s. Their problems were compounded by which of these factors in that same decade?

A)Thrifts were affected by the end of Regulation Q.
B)Thrifts were impacted by the Depository Institution Deregulation and Monetary Control Act (DIDMCA).
C)Thrifts were fully impacted by Regulation Q starting in that decade.
D)Thrifts were affected by the Garn-St. Germain Depository Institutions Act.

Question 18

In early twentieth century, credit unions began in response to which of the following?

A)Working class and small merchants had to go to loan sharks for needed funds.
B)Loan societies were dependent on subsidies from the wealthy.
C)Immigrants preferred to borrow money from people like themselves.
D)Banking laws prevented commercial banks from making small loans.

Question 19

What could be considered a return to the "traditional" role of thrifts?

A)Emphasizing real estate loans rather than commercial loans
B)Emphasizing consumer loans rather than commercial loans
C)Making somewhat riskier loans than commercial banks
D)Primarily focusing on financial services to businesses

Question 20

How did the Resolution Trust Corporation (RTC)operate?

A)They were responsible for borrowing money for the thrift institutions.
B)They were responsible for the management of the thrift institutions.
C)They were responsible for buying the thrift institutions assets.
D)They were responsible for closing the failed thrift institutions.

Question 21

Which of the following was a criticism of finance companies during the financial crisis?

A)Not paying corporate income taxes
B)Charging high interest rates
C)Misrepresenting the risks of adjustable-rate mortgages
D)Leasing equipment to firms

Question 22

Jean is concerned she might not qualify for a traditional loan. Which of the following bank holding companies would most likely be able to provide her services?

A)CashNetUSA
B)GE Capital
C)GM Financial
D)HBSC Finance

Question 23

Savings & Loans were set up as nonprofit institutions to provide consumer credit to the working class and small business.

Question 24

Compare and contrast the primary differences between Savings & Loans and credit unions and discuss why those differences caused the institutions to act differently.

Question 25

How did finance companies provide mortgages that contributed to the financial crisis of 2008?

Question 26

Which of the following is NOT a type of loan provided by a consumer finance company?

A)Home mortgage
B)Auto loan
C)Education loan
D)Consumer durables

Question 27

The Federal Home Loan Bank System supplied low-cost funds so that thrifts could pay off their depositors in a bank run.

Question 28

When the Resolution Trust Corporation sold off the assets of a failed Savings & Loan, depositors were paid off, but the owners were wiped out and the managers of the thrifts were fired.

Question 29

As the country started to recover from the recession in early 2009, small business lending by credit unions

A)decreased slightly, while commercial bank lending increased.
B)decreased by 25%.
C)increased somewhat, while commercial bank lending decreased.
D)increased by 25%.

Question 30

Why is accounts receivable financing NOT a costless transaction for a firm?

A)The receivables must be sold at a discount.
B)The receivables are used as collateral, making them less valuable.
C)The receivables must now be shown as a liability on the firm's books.
D)Customers do not like it and sometimes take their business elsewhere.

Question 31

Who created the first finance companies?

A)Thrifts
B)Retailers
C)Commercial banks
D)Consumer groups

Question 32

Compare and contrast the means and motivations for establishing the first thrifts to Kerry Killinger's time at Washington Mutual and that company's efforts.

Question 33

Which of these is an accurate description of a captive sales finance company?

A)A finance company that has very high rates on loans it makes
B)A finance company that must be used by a captive audience, for example, the finance company an auto dealer may recommend to someone purchasing a car
C)A finance company owned by a parent company to help finance the goods sold by the parent company
D)A finance company that sits within a bank holding company

Question 34

Finance companies, one type of nonbank bank, only make loans; they generally do not take deposits.

Question 35

Consumer finance companies lend money to people who do not have access to traditional banking services because of a

A)lack of credit.
B)great credit history.
C)high income.
D)consistent employment history.