Management Financial Institutions

Chapter 1

Banking and the Financial Services Industry

Multiple Choice

1. Which act separated commercial banking, investment banking and insurance into three separate industries?

a. Glass-Steagall Act

b. Bank Holding Company Act

c. McFadden Act

d. Federal Reserve Act

e. Competitive Equality Banking Act

Answer: a

2. Which act limited the activities a company could engage in if it owned a bank?

a. Federal Reserve Act

b. Bank Holding Company Act

c. McFadden Act

d. Glass-Steagall Act

e. Competitive Equality Banking Act

Answer: b

3. Which of the following mortgage types were offered to “subprime” borrowers?

a. Interest Only

b. Option Adjustable-Rate

c. Principal Only

d. All of the above

e. a. and b. only

Answer: e

4. The U.S. government took all of the following actions to address the credit crisis in 2008 except:

a. putting Fannie Mae into conservatorship.

b. passed the Troubled Asset Relief Program (TARP).

c. created the Keep Banks Solvent (KBS) agency.

d. authorized large non-financial firms to sell bonds that were FDIC-insured.

e. temporarily increased FDIC domestic deposit coverage to $250,000.

Answer: c

5. At the end of 2008, which of the following investment banks remained independent?

a. Bear Stearns

b. Goldman Sachs

c. Lehman Brothers

d. Merrill Lynch

e. a. and b.

Answer: b

6. In 2008, the U.S. Treasury financial supported financial institutions by:

a. purchasing troubled assets.

b. buying preferred stock in some financial institutions.

c. issuing guarantees on money market funds.

d. increasing the deposit insurance limit.

e. all of the above.

Answer: e

7. Which of the following is false regarding community banks?

a. They typically have assets in excess of $1 billion.

b. They typically operate in a limited geographic area.

c. Community banks often focus on lending to small...