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39 Cards in this Set
- Front
- Back
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A fixed interest rate on a bond is called...
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Coupon rate.
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What is a zero coupon bond?
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Bonds that do not make payments and are sold at a discount.
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What type of security is not back by any real or financial asset?
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Debenture bond.
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Mortgage loans made by financial institutions or motgage brokers without federal insurance are called...
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Conventional mortagages.
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What is an inflation index bond?
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The principal is adjusted for inflation at the time when the coupon payment is made, usually every 6 months.
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Stockholders who are paid a dividend before common stock holders...
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Preferred stock holders
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What benefits come with being a common stockholder?
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1. Paid a variable dividend (after preferred holders)
2. Voting rights in company |
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Who regulates the marketing of newly issued shares of stock?
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The SEC
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The initial margin requirement is...
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Currently 50% as set by the FED
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Stocks are traded in the _______ market whereas commercial paper is traded in the _________ market.
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Capital market / Money market
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What is the primary market.
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Where stocks are traded for the first time. IPO
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What is the difference between a broker and a dealer?
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The dealer sometimes takes a position (becomes the principal) in addition to arranging the trades. A broker only arranges the trades for a fee.
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What is the 'ask price'?
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The price at which a market maker is willing to buy securities.
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The borrowing and loaning of reserves among DIs, typically overnight, occurs in what market?
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Fed funds market
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What types of financial claims are financial intermediaries responsible for?
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Checking deposits, savings deposits, and time deposits
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What is the risk that FIs face when depositors withdraw without warning?
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Liquidity risk
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What is default risk?
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The risk associated with borrowers not repaying financial claims.
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S&Ls were developed to primarily help...
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Finance the construction and purchase of new housing.
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What are the two main functions of securities firms?
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Investment banking and the selling of previously issued securities.
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What protects me if my brokerage firm becomes insolvent?
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The Securities Industry Protection Corporation (SIPC)
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What did the Gramm-Leach Bliley Act (GLBA) did what?
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Deregulated banking. Allowed for the creation of financial holding companies.
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Name three provisions of the Gramm-Leach Bliley Act.
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1. Financial holding companies (banks, insurance, securities, etc)
2. Financial holdings can engage in merchant banking activity 3. Financial holdings can before any financial activity |
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Three main restrictions regulated banking prior to 1980s.
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1. Restrictions on most asset acquisitions
2. Regulation Q- interest rate ceilings 3. Restrictions on branching |
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What is capital equity?
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The value of a bank's assets minus its liabilities.
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Who is the primary regulator of banks that are not bank holding companies?
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Comptroller of the Currency
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What did the Glass-Steagall Act of 1933 do?
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Separated commercial and investment banking
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What did the McFadden Act do?
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Outlawed interstate branching
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Deregulation in 1980 and 1982 resulted in what? (Three of them)
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1. Regulation Q was phased out
2. Banks/thrifts had expanded assets and liability powers 3. Thrifts were allowed to offer checkable deposits |
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The biggest flaw of the regulatory structure put in place during the Great Depression was in...
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Not recognizing the sequence of events that would occur if market interest rates increased and remained above Reg Q ceilings for a significant time period.
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The Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) did what?
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Phased out Reg Q interest rate ceilings, established uniform/universal RR, increased asset/liability options for DIs, authorized NOW accts, suspended usury ceilings.
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The Garn-St Germain Act of 1982 did what?
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Authorized money market deposit accounts and super NOW accounts
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Who regulates insurance companies?
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The insurance commissioner of the state
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What is a monetary control measure covered by the DIDMCA?
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Uniform reserve requirements
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The members of the Board of Governors are appointed by...
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The President, with advice and consent of the Senate.
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What is the Federal Open Market Committee?
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1. Formulate monetary policy
2. Principal policy-making body of the Fed 3. Consists of 12 memebers |
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Results of the Glass Steagall Act of 1932?
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1. Change Feds objectives
2. Fed became a central bank 3. broadened powers of the Fed |
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Why did the national banks prior to the National Bank System lose their Federal charter?
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1. Unfair competition
2. Charters for private/profit banks 3. The culture said the Gov't should have min intervention |
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Main weakness of the National Bank System.
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Supply of bank notes by national banks was limited to 90% of market value of the Union bond they owned.
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What was the Real Bill Doctrine?
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Only securities issued to meet productive economic activities should be discounted by the CB.
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