Question 1

SAIF has reached the insurance coverage goal mandated by the U.S. Congress in the Financial Institutions Reform, Recovery and Enforcement Act.

Accepted Answer

SAIF (Savings Association Insurance Fund) was merged into the FDIC's (Federal Deposit Insurance Corporation) Deposit Insurance Fund (DIF) in 2006, and thus, it no longer exists as a separate entity to reach insurance coverage goals. The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) initially established SAIF, but its specific goals have since evolved under the broader FDIC administration.

Question 2

Savings banks are not permitted to convert from mutual to stockholder form in the United States, but savings and loans can do so with federal regulatory agency approval.

Accepted Answer

Both savings banks and savings and loan associations can convert from mutual to stockholder form with the approval of federal regulatory agencies in the United States. This process is known as mutual-to-stock conversion and is subject to regulatory oversight to ensure it is conducted fairly and in the best interest of the institution's members and the financial system.

Question 3

Money market fund investments must be made, 95 percent or higher, in top-quality (top-credit-rated) securities.

Accepted Answer

Money market funds are required to invest at least 95% of their assets in high-quality, or top-credit-rated, securities to ensure safety and liquidity.

Question 4

Insurance companies are regulated primarily by the federal government and not the states.

Accepted Answer

Insurance companies in the United States are primarily regulated by individual state governments, not the federal government. Each state has its own insurance department that oversees the operations of insurers within its jurisdiction.

Question 5

The terms of policies sold by insurance companies must be approved by state insurance commissions.

Accepted Answer

Insurance companies must have their policy terms approved by state insurance commissions to ensure they meet regulatory standards and protect consumers.

Question 6

Penny Benny currently has a large surplus balance in its insurance reserve.

Accepted Answer

Without specific, up-to-date financial data or a recent statement from Penny Benny or a credible financial analysis source, it's not possible to accurately claim the current status of their insurance reserve balance.

Question 7

Under U.S. law Penny Benny must insure all defined-contribution pension plans.

Accepted Answer

Penny Benny is not a recognized entity under U.S. law for insuring defined-contribution pension plans. The Pension Benefit Guaranty Corporation (PBGC) insures defined-benefit plans, not defined-contribution plans.

Question 8

According to the textbook the ultimate impact of regulation is to restrict the entry of new competitors, raise financial-service prices and reduce the likelihood of institutional failures.

Accepted Answer

Regulation in the financial services sector often aims to ensure stability and protect consumers, but it can also have the unintended consequence of creating barriers to entry for new competitors, potentially leading to higher prices for services and, by promoting stability and compliance, reducing the likelihood of institutional failures.

Question 9

Penny Benny has no legal authority to regulate pension funds in the United States.

Accepted Answer

Penny Benny, as described, does not appear to be a recognized regulatory authority or entity involved in the regulation of pension funds in the United States. Regulation of pension funds is typically overseen by government agencies such as the Department of Labor, the Internal Revenue Service, and the Pension Benefit Guaranty Corporation.

Question 10

Investment companies are regulated mainly by the Securities and Exchange Commission (SEC) in the United States.

Accepted Answer

The Securities and Exchange Commission (SEC) is the primary federal regulatory agency responsible for enforcing federal securities laws and regulating the securities industry, including investment companies, in the United States.

Question 11

The SEC is governed by five commissioners who are appointed by the President of the United States for five-year terms.

Accepted Answer

The U.S. Securities and Exchange Commission (SEC) is indeed governed by five commissioners. These commissioners are appointed by the President of the United States and confirmed by the Senate, each serving staggered five-year terms. This structure is designed to ensure that no more than three commissioners belong to the same political party, promoting nonpartisan regulation of the securities markets.

Question 12

Commercial banks are not allowed to sell mutual fund shares in the same physical area as they sell deposits, for fear of taking stable deposits out of the banking system.

Accepted Answer

Commercial banks are allowed to sell mutual fund shares in the same physical area as they sell deposits, as long as they comply with regulatory requirements and maintain a clear distinction between banking and investment services.

Question 13

A banks' poor or mediocre Community Reinvestment Act (CRA) record could be held against it by community activists if the bank needed regulatory approval for a merger or acquisition.

Accepted Answer

Community activists can use a bank's poor or mediocre Community Reinvestment Act (CRA) record as leverage to oppose or negotiate terms during the bank's efforts to gain regulatory approval for mergers, acquisitions, or other expansions, as regulatory agencies consider CRA performance in their approval process.

Question 14

The Financial Services Modernization (Gramm-Leach-Bliley) Act allows commercial banks to affiliate with insurance companies and investment banks by creating financial-services holding companies (FHCs).

Accepted Answer

The Financial Services Modernization Act, also known as the Gramm-Leach-Bliley Act, was enacted in 1999 to repeal part of the Glass-Steagall Act, allowing commercial banks, investment banks, and insurance companies to consolidate through financial-services holding companies (FHCs), thereby permitting them to offer a broader range of financial services.

Question 15

While money market mutual funds have no government deposit insurance, some do carry private deposit insurance.

Accepted Answer

Some money market mutual funds indeed offer private deposit insurance as a way to provide additional security to their investors, even though they are not covered by federal deposit insurance like FDIC insurance for bank accounts.

Question 16

In today's largest security-dominated financial systems, the banks in those countries also enjoy the widest regulatory latitude with respect to service activities and product offerings.

Accepted Answer

While banks in large, security-dominated financial systems may have significant influence, regulatory latitude varies widely across countries and is often subject to stringent international and domestic regulations aimed at ensuring financial stability and protecting consumers, rather than allowing wide freedom in service activities and product offerings.

Question 17

When a corporation's "insiders" buy or sell that firm's securities, it must be reported to the Comptroller of the Currency.

Accepted Answer

Insider transactions must be reported to the Securities and Exchange Commission (SEC), not the Comptroller of the Currency.

Question 18

Each business affiliated with a financial holding company is regulated and supervised by its traditional functional regulator.

Accepted Answer

Each business under a financial holding company is indeed regulated and supervised by its traditional functional regulator, ensuring that specific industry standards and regulations are met, depending on the nature of the business (e.g., banking, securities, insurance).

Question 19

The stress tests of large banks highlighted in Basel II were performed ahead of schedule to the recent credit crisis of 2007-2009.

Accepted Answer

The Basel II framework, which included stress testing, was implemented before the 2007-2009 financial crisis, but the crisis revealed that these tests were inadequate in predicting the severity of the crisis.

Question 20

The US deposit insurance limit was set in 1980 and there have been recent calls to raise the deposit insurance limit from the current $200,000.

Accepted Answer

The current standard deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. This limit was last adjusted in 2008, not in 1980.

Quiz 17: The Impact of Deregulation and Regulation on Financial Institutions and Banking Industry in the United States