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39 Cards in this Set

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