Question 1

The Federal Reserve makes discount loans to banks,and similarly,the FHLBS makes loans to savings and loan institutions. The Fed loans are expected to be repaid ________ while the FHLBS loans are ________.

Accepted Answer

The Federal Reserve expects their discount loans to be repaid quickly, while the FHLBS loans are expected to be repaid for longer periods of time.

Question 2

Like the dual banking system for commercial banks,thrifts can have either ________ or ________ charters.

Accepted Answer

Thrifts can have either state or federal charters, similar to commercial banks under the dual banking system. Local and municipal options are not available for thrifts.

Question 3

The FHLBS gives loans to S&Ls and thus performs a function similar to the ________ for commercial banks.

Accepted Answer

The Federal Home Loan Banks System (FHLBS) function as a lender of last resort for savings and loans (S&Ls) and provides them with low-cost loans to support liquidity and lending. This is analogous to the Federal Reserve's role as a lender of last resort for commercial banks through the discount window. The US Treasury issues government debt, the Office of the Comptroller of the Currency regulates national banks, and the US Mint produces coins and currency. None of these entities are directly responsible for lending to banks or S&Ls.

Question 4

Although it has a population about half that of the United States,Japan has

Accepted Answer

Japan has fewer than 100 commercial banks, as the banking industry in Japan is highly consolidated compared to the United States.

Question 5

Mutual savings banks are primarily regulated by

Accepted Answer

Mutual savings banks are primarily regulated by the states in which they are located. However, they can also be subject to federal regulations from entities such as the FDIC or OCC.

Question 6

Nationwide banking might reduce bank failures due to

Accepted Answer

Nationwide banking allows for banks to diversify their loan portfolios across state lines, reducing the risk of large-scale failures due to regional economic downturns or other localized factors. This can help to mitigate the risk of bank failures and improve financial stability.

Question 7

Critics of nationwide banking fear

Accepted Answer

Critics of nationwide banking fear that it will lead to the elimination of community banks. Nationwide banks with larger resources and economies of scale can offer better rates and services, making it difficult for smaller community banks to compete. This can lead to the closure or acquisition of community banks, reducing access to local banking services and potentially harming the local economy.

Question 8

As a result of the global financial crisis several of the large,free-standing investment banking firms chose to become bank holding companies. This means that they will now be regulated by

Accepted Answer

Becoming a bank holding company means that the investment banking firm is now subject to regulation by the Federal Reserve, which oversees bank holding companies under the Bank Holding Company Act of 1956. The other options, such as FDIC, state banking authorities, and Treasury, do not have primary regulatory authority over bank holding companies.

Question 9

In a ________ banking system,commercial banks engage in securities underwriting,but legal subsidiaries conduct the different activities. Also,banking and insurance are not typically undertaken together in this system.

Accepted Answer

In a British-style universal banking system, commercial banks can engage in securities underwriting through legal subsidiaries, which allows for a separation of different financial activities. However, unlike in a full universal banking model, banking and insurance operations are generally kept separate, aligning with the characteristics described.

Question 10

Bank consolidation will likely result in

Accepted Answer

The answer of Bank consolidation will likely result in
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Question 11

The legislation overturning the Glass-Steagall Act is

Accepted Answer

The Glass-Steagall Act, which separated commercial and investment banking, was repealed by the Gramm-Leach-Bliley Act in 1999. The other options mentioned are various banking laws, but none of them are specifically related to the repeal of Glass-Steagall.

Question 12

Under the Gramm-Leach-Bliley Act the oversight of the securities activities of bank holding companies belongs to

Accepted Answer

The Gramm-Leach-Bliley Act allows the Securities and Exchange Commission (SEC) to oversee the securities activities of bank holding companies.

Question 13

Thrift institutions include

Accepted Answer

Thrift institutions are financial institutions that specialize in accepting deposits from customers and primarily use those funds to provide mortgage loans. Mutual savings banks are an example of a thrift institution, while commercial banks, brokerage firms, and insurance companies are not.

Question 14

Mutual savings banks are owned by

Accepted Answer

Mutual savings banks are owned by their depositors, as they are designed to be non-profit institutions that serve the depositors and the community. This is different from commercial banks, which are typically owned by shareholders who expect to earn a profit on their investment. Mutual savings banks are also different from partnerships and foreign investors, as they do not have ownership stakes in the bank.

Question 15

Experts predict that the future structure of the U.S. banking industry will have

Accepted Answer

The U.S. banking industry is expected to continue having several thousand banks due to its diverse and decentralized nature, despite trends towards consolidation.

Question 16

A major difference between the United States and Japanese banking systems is that

Accepted Answer

Japanese banks are allowed to hold substantial equity stakes in commercial firms, whereas American banks are generally restricted from doing so due to regulations intended to prevent conflicts of interest and maintain the separation between banking and commerce.

Question 17

In a ________ banking system,commercial banks provide a full range of banking,securities,and insurance services,all within a single legal entity.

Accepted Answer

A universal banking system, also known as a diversified banking system, is a model in which commercial banks offer a broad range of financial services, including securities, insurance, and investment banking services, all of which are integrated within a single legal entity. This enables the bank to provide a wide range of services to clients and diversify its sources of revenue.

Question 18

Under the Gramm-Leach-Bliley Act states retain regulatory authority over

Accepted Answer

The Gramm-Leach-Bliley Act allows states to continue to retain regulatory authority over insurance activities. The act does not give states regulatory authority over bank holding companies, securities activities, or bank subsidiaries engaged in securities underwriting.

Question 19

As the banking system in the United States evolves,it is expected that

Accepted Answer

The trend in recent years has been towards consolidation and the growth of larger banks, with smaller banks merging or being acquired by larger ones. This trend is expected to continue, leading to an increase in the number and importance of large banks.

Question 20

One of the concerns of increased bank consolidation is the reduction in community banks which could result in

Accepted Answer

Community banks are often the ones that provide loans to small businesses in the area. If there are fewer community banks due to bank consolidation, there may be a reduction in lending to small businesses, which could hurt the local economy.

Quiz 11: Banking Industry: Structure and Competition

The Federal Reserve makes discount loans to banks,and similarly,the FHLBS makes loans to savings and loan institutions. The Fed loans are expected to be repaid while the FHLBS loans are .

Like the dual banking system for commercial banks,thrifts can have either or charters.