Deck 15: Comparative Analysis of Financial Institutions and Their Operations

Question 1

Credit unions account for about one 60 percent of all consumer installment loans in the United States.

Answer 1

False

Question 2

Credit unions are nonprofit associations.

Answer 2

True

Question 3

Only qualified members can borrow from a credit union or open a share deposit account there.

Answer 3

True

Question 4

Credit Unions in the United States make more loans to households (individuals and families) than do commercial banks.

Question 5

Most credit union members work for the same employer or for one of a group of related employers.

Question 6

The number of U.S. credit unions in operation has been declining since 1969; moreover, the average size credit union has also been declining under the pressure of intense competition from banks and savings and loan associations.

Question 7

The most important loan (in terms of volume) made by credit unions is the loan to finance the purchase of a new business facility.

Question 8

Credit unions can make unsecured loans and credit-card loans up to five years in maturity.

Question 9

Credit unions can grant secured loans with maturities out to 30 years.

Question 10

Credit unions are not permitted to make loans to each other.

Question 11

Credit-union members, technically speaking, are creditors, not owners, of a credit union.

Question 12

Persons who borrow money from a savings and loan association must also save there.

Question 13

Savings and loan associations, especially stockholder S&Ls, rely mainly upon owner's capital to fund the loans they grant.

Question 14

A mutual savings and loan association, technically, is owned by its depositors.

Question 15

There is trend in the savings and loan industry away from the stock form of organization towards the mutual form.

Question 16

Mortgage credit accounts for about one third of the savings and loan industry's total assets.

Question 17

The leading state in terms of the number of savings banks headquartered there is New York.

Question 18

All savings banks are stockholder-owned corporations.

Question 19

Unlike other depository institutions new savings banks can be chartered only by the states, not by the federal government.

Question 20

Money market funds got their start after federal interest rate ceilings were lifted and the funds' share accounts became more attractive.

Question 21

According to your textbook, the classical model of a savings and loan association cannot survive today's volatile economic environment; some S&Ls have branched out to become mortgage bankers or family financial centers.

Question 22

Savings banks were begun to meet the financial needs of small savers.

Question 23

Money market funds are regulated by the Securities and Exchange Commission in the United States.

Question 24

Savings banks were started to meet the financial needs of small savers.

Question 25

Savings banks facing severe earnings problems have gotten into these problems due to inflexible asset structures, numerous bad real estate loans and higher deposit costs.

Question 26

Money market funds are insured by an agency of the U.S. government.

Question 27

Money market funds face no competitive disadvantages relative to other depository institutions.

Question 28

Savings and loan associations cannot offer credit cards like commercial banks can do.

Question 29

The development of Super NOWs and MMDAs helped money market funds to grow faster in the 1980s than they did during the 1970s.

Question 30

Most money market funds charge their customers a front-end load when a new account is opened or additional shares are purchased.

Question 31

Money market funds are not regulated as to the quality of securities they are permitted to buy.

Question 32

Under SEC rules no more than 1 percent of a money market funds' total assets can be placed in the securities of a single corporate issuer.

Question 33

Most money market funds allow customers to purchase or redeem shares by wire or by telephone.

Question 34

Unlike banks and savings and loans, credit unions have reported no failures in recent years.

Question 35

Credit unions are allowed to make some loans to business firms.

Question 36

Thrift institutions today are not making widespread use of securitized assets.

Question 37

Loan sales are a popular funds source for commercial banks today, but not for savings and loan associations.

Question 38

If regulators allow insolvent thrift institutions to continue to operate this policy is called regulatory forbearance.

Question 39

On average, the equity capital of an S&L makes up only about 3 to 4 percent of its total funds sources.

Question 40

The U.S. government has authorized the agencies regulating S&Ls to use more regulatory forbearance today than in the past.

Question 41

Credit unions face increasing demand for loans in such traditional areas as automobile loans.

Question 42

The Savings Association Insurance Fund (SAIF) is managed by the FDIC.

Question 43

Beginning in 1995 savings and loan profits were fully competitive with the profits of commercial banks.

Question 44

A growing proportion of S&L liabilities are rate insensitive, according to the textbook.

Question 45

In periods of rising interest rates the net interest margin of the savings and loan industry tends to rise.

Question 46

A Collateralized Mortgage Obligation (CMO) is one vehicle used by S&Ls to securitize loans.

Question 47

Today, both the Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation (FDIC) regulate federally-licensed S&Ls.

Question 48

One reason Money Market Mutual Funds are so popular is that they are exempt from federal regulation.

Question 49

Due to their vulnerability to interest rate "mismatch", the thrift industry uses derivative contracts extensively to hedge its risk.

Question 50

Recently, many commercial banks have converted to thrift or credit union status in order to offer a wider range of financial services.

Question 51

Due to their small average size, most credit union deposits are still uninsured.

Question 52

The first savings at a law is originated in the 18th century is reddish and building societies founded on the principle called neighbors helping neighbors.

Question 53

The first US savings-and-loan appeared in the Philadelphia area in 1831.

Question 54

Savings and loans were also referred to as building and people societies.

Question 55

The early savings and loans were managed and directed by their depositors with large depositors often having greater influence in the directing of the activities of the association.

Question 56

By 2009, money market funds assets in total had climbed to nearly $3.3 trillion.

Question 57

Savings bank's first appeared in Scotland in 1810 and allowed access to the financial system for low-income savers and borrowers for the first time.

Question 58

The first savings bank in the United States was the Philadelphia Savings Fund Society in 1916.

Question 59

Credit unions account for about 10 percent of all consumer savings in the United States.

Question 60

As of 2009, total financial assets and liabilities held by U.S. credit unions was approximately $816 billion.

Question 61

For comparison, around 20% of credit unions held more than $1 million in assets in 1970, whereas today the median size credit union falls in the two to 5 million asset size range.

Question 62

Worldwide there are over 50,000 credit unions in close to 100 countries with more than 170 million members.

Question 63

The growing importance of nonbank financial institutions in the economy and financial system is due to their:

A) Rapid growth
B) Offering of bank-like services
C) Both A and B
D) None of the above

Question 64

The three leading consumer installment lending institutions in the United States, arrayed in order from most important to least important, are:

A) Commercial banks, credit unions and savings and loans
B) Finance companies, commercial banks and credit unions
C) Commercial banks, credit unions and savings banks
D) Commercial banks, finance companies and credit unions
E) None of the above

Question 65

Credit unions offer an interest-bearing checking account known as the:

A) Share draft
B) NOW account
C) ATS
D) Money store
E) None of the above

Question 66

Credit unions account for about what proportion of all consumer loans in the U.S.?

A) One-half
B) One-third
C) 10 percent
D) Less than 5 percent
E) Less than one percent

Question 67

Cooperative, self-help associations of individuals are also known as:

A) Money market funds
B) Credit unions
C) Savings banks
D) Investment banks
E) None of the above

Question 68

One important financial intermediary is classified as a nonprofit association. This intermediary is the:

A) Commercial bank
B) Savings and loan association
C) Savings bank
D) Credit union
E) None of the above

Question 69

The thrift institutions' principal problem as described in the textbook is:

A) Too many rate sensitivities
B) Portfolio maturity mismatch
C) Competition
D) The rise of credit unions
E) None of the above

Question 70

A growing number of savings and loans are converting to:

A) Stockholder-owned companies
B) Mutuals
C) Nonprofit associations
D) Industrial corporations
E) None of the above

Question 71

The principal asset held by U.S. savings and loan associations is:

A) Mobile home loans
B) Home improvement loans
C) Loans on savings accounts
D) Residential mortgage loans
E) None of the above

Question 72

The two federal agencies issuing or guaranteeing mortgage-backed securities used as investments and as sources of funds by savings and loan associations are the:

A) Federal Home Loan Bank Board, Federal National Mortgage Association
B) Government National Mortgage Corporation, Federal Home Loan Mortgage Corporation
C) Federal National Mortgage Association, Federal Home Loan Mortgage Association
D) Federal Reserve System, Government National Mortgage Association
E) None of the above

Question 73

One of the following deposits is not offered by savings and loan associations. Which one?

A) MMDAs
B) NOWs
C) Share drafts
D) Passbook savings
E) All of the above deposits are offered by savings and loans

Question 74

There are about ____ savings banks currently operating in the United States.

A) 10,000
B) A few thousand
C) A few hundred
D) Less than fifty
E) Less than ten

Question 75

The principal asset held by savings banks is:

A) Corporate bonds
B) Corporate stock
C) Municipal bonds
D) Mortgages
E) None of the above

Question 76

In the textbook, a credit union is classified as a:

A) Depository institution
B) Contractual institution
C) Investment institution
D) Primary intermediary
E) None of the above

Question 77

In your textbook, mutual funds that purchase Treasury bills, bank CDs, commercial paper and other short-term securities would be classified as:

A) Contractual institution
B) Investment institution
C) Security dealers
D) Money market funds
E) None of the above

Question 78

The majority of these financial institutions are classified as "no load;" the financial institutions described must be:

A) Commercial banks
B) Savings and loans
C) Money market funds
D) Pension funds
E) None of the above

Question 79

In 1978, Congress authorized the awarding of federal charters for:

A) Money market funds
B) Savings banks
C) Credit unions
D) Savings and loan associations
E) None of the above

Question 80

A 1991 ruling of the Securities and Exchange Commission (SEC) requires that money market funds acquire lower-quality securities only up to ____ percent of their assets.

A) 5
B) 10
C) 15
D) 20
E) None of the above