Question 1

Under the Financial Reform Act (Dodd-Frank Act) of 2010, all federally chartered savings institutions are to be regulated by the Federal Reserve, so these savings institutions no longer haveanincentive to go regulator shopping.

Accepted Answer

The Dodd-Frank Act transferred the regulation of federally chartered savings institutions to the Office of the Comptroller of the Currency (OCC), not the Federal Reserve.

Question 2

____ is (are) not a main source of funds for savings institutions.

Accepted Answer

Mortgages are not a main source of funds for savings institutions; instead, they are a primary use of funds. Savings institutions typically provide mortgages to borrowers, using deposits, borrowed funds, and capital as their main sources of funding.

Question 3

____ is (are) not a main use of funds for savings institutions.

Accepted Answer

Capital is not a main use of funds for savings institutions; rather, it is a source of funds. Savings institutions primarily use their funds to provide mortgages, consumer and commercial loans, and to invest in mortgage-backed securities.

Question 4

Which of the following is not a deposit source of funds for savings institutions?

Accepted Answer

The answer of Which of the following is not a...

Question 5

During the credit crisis of 2008-2009, savings institutions experienced all of the following except:

Accepted Answer

Savings institutions typically do not finance leveraged buyouts, so they did not experience high default rates on such loans during the credit crisis. However, they did experience declines in mortgage originations, high default rates on subprime mortgages, and losses on investments in mortgage-backed securities.

Question 6

The Financial Reform Act of 2010 did all of the following except:

Accepted Answer

The Financial Reform Act of 2010 did not require savings institutions to sell off any holdings of junk bonds or prohibit them from investing in junk bonds in the future. This statement is incorrect. The Act did require stronger standards for obtaining a mortgage, increased disclosures in the sale of mortgage-backed securities, and established the Consumer Financial Protection Bureau.

Question 7

During the credit crisis of 2008-2009, some credit unions suffered losses on second mortgages and home-equity loans that they had provided, and some credit unions experienced losses on mortgage#NAME?acked securities in which they had invested.

Accepted Answer

This statement is true. Credit unions were not immune to the effects of the credit crisis and experienced losses on various types of loans and investments, including second mortgages, home-equity loans, and mortgage-backed securities.

Question 8

To manage interest rate risk, a savings institution could use

Accepted Answer

Interest rate futures contracts are financial derivatives that allow the holder to lock in a future interest rate, providing a direct method to hedge against the risk of fluctuating interest rates. Fixed-rate mortgages, currency options, and letters of credit do not directly manage interest rate risk in the same way.

Quiz 21: Thrift Operations