Financial Institutions Chapter 17 Questions Wheelen And Hunger

Front 1

“Thrifts” include two traditional types of firms: ________ and ________.

Back 1

savings associations; savings banks

Front 2

The traditional S&L had (short/long) maturing assets, (short/long) maturing deposits, and incurred (losses/gains) when interest rates increased.

Back 2

long; short; losses

Front 3

Two important pieces of deregulation legislation passed in 1980 and 1982 were _____ and _____.

Back 3

Depository Institutions Deregulation & Monetary Control Act (1980);
Garn-St. Germain Act (1982).

Front 4

The primary assets and liabilities of S&Ls have been ________ and ________.

Back 4

mortgage loans; deposits

Front 5

As interest rates trended upward in the 1970s and early 1980s, the market value of fixed-rate S&L mortgages (increased/decreased).

Back 5

decreased

Front 6

Thrifts still emphasize home mortgage lending because of _______________ .

Back 6

federal tax breaks

Front 7

Federal S&Ls are regulated by the ________ and insured by ________.

Back 7

Office of Thrift Supervision; FDIC-Savings Association Insurance Fund

Front 8

______ ______ credit unions assist in the flow of funds among member credit unions.

Back 8

Corporate central

Front 9

In contrast to banks, consumer finance companies raise their funds in (large/small) amounts and make (large/small) loans.

Back 9

large; small

Front 10

Finance companies have trended toward more (business/consumer) loans and more (secured/unsecured) consumer loans.

Back 10

business; secured

Front 11

T F Compared to 25 years ago, there are more thrifts earning lower profits.

Back 11

F
The industry has consolidated significantly and become more profitable.

Front 12

T F
When market interest rates fall, the market value of fixed-rate mortgages increases.

Back 12

T
The recent decline in interest rates has increased the value of the fixed-rate mortgage portfolio. Security prices vary inversely with interest rates.

Front 13

T F
Most savings and loans are owned by their service corporations.

Back 13

F
Most S&Ls own subsidiary service corporations which perform mortgage servicing, financing, and other services.

Front 14

T F
Fed funds are an important source of thrift funds.

Back 14

F
Thrifts borrow more from the Federal Home Loan Banks than in the Fed funds market

Front 15

T F
If an S&L forecasted falling interest rates over the next five years, it would probably promote variable-rate loans.

Back 15

F
The S&L would try to lock in today’s higher yields while letting cost of funds decline

Front 16

T F
Savings and loan associations have been an important national policy tool for promoting home ownership.

Back 16

T
Tax incentives keep them significantly involved in home mortgages.

Front 17

T F
The Resolution Trust Corporation manages the assets of failed thrifts.

Back 17

F
The RTC was disbanded in 1995.

Front 18

T F
Credit union membership is growing, but the number of credit unions is declining.

Back 18

T
With deregulation, competition is keener and economies of scale are an incentive to consolidate.

Front 19

T F
The U.S. Central Credit Union acts as a kind of “central bank” for credit unions

Back 19

T
Provides banking services to corporate central credit unions.

Front 20

T F
Finance companies borrow heavily in both the money and capital markets.

Back 20

T
Their debt structure is a mix of money market (commercial paper) and capital market obligations.

Front 21

Thrifts traditionally depended upon a yield curve that

a.was sloping downward.
b.was flat.
c.was upward sloping.
d.was none of the above.

Back 21

C. An upward sloping yield curve (rates by time) enables one to borrow short (low) and lend long (high) with a consistent spread.

Front 22

Many thrifts have converted to stock corporations in order to

a. enhance their ability to raise borrowed capital.
b. enable the firm to raise equity capital.
c. enable the firm to have shareholders.
d. enable management to maximize their personal wealth.

Back 22

b The need for added net worth and to take advantage of the holding company form are significant reasons

Front 23

The classic model of thrift management involved

a. a negative maturity gap
b. a negative duration gap
c. a positive maturity gap
d. a zero gap

Back 23

a Long-term mortgages; short-term deposits; negative maturity gap.

Front 24

FHLB stands for

a. Federal Home Loan Bank
b. Federal Housing Leverage Bureau
c. Financial Holdings Long Bond
d. Forward Hedge Linked Bond

Back 24

a Federal Home Loan Bank

Front 25

Credit Unions differ from thrifts chiefly in terms of

a. ownership structure
b. loan emphasis
c. deposit insurance
d. all of the above

Back 25

d Credit Unions are mutually owned, focus on smaller consumer loans, and obtain deposit insurance through NCUSIF or CUNA.

Front 26

Which one of the following would reduce the high negative GAP position of a S&L?

a. increased fixed-rate mortgages
b. increased long-term CDs
c. increased MMDAs
d. increased Federal funds purchased

Back 26

b The S&L has more rate sensitive liabilities than rate sensitive assets and can reduce this negative GAP (GAP = RSA - RSL) by rolling more of its RSL into long-term CDs.

Front 27

Finance companies are securitizing more of their receivables

a. under regulatory pressure
b. for essentially the same reasons as banks
c. to widen their GAP
d. to circumvent rate ceilings

Back 27

b For essentially the same reason as banks—increase income, reduced asset commitments.

Front 28

Service companies organized by CUNA assist credit unions by

a. providing share draft insurance.
b. providing data processing.
c. providing investment services.
d. all of the above

Back 28

d These service companies provide a flexible means of responding to market needs.

Front 29

The primary regulator of credit unions is

a. the Central Liquidity Facility.
b. the central credit union.
c. the National Credit Union Administration.
d. the National Credit Union Share Insurance Fund.

Back 29

c NCUA charters, insures, and examines federal credit unions.

Front 30

Major finance companies place their commercial paper "directly," which means

a. directly from the bank.
b. through direct contact with dealers.
c. through direct contact with suppliers of funds.
d. directly through the mail.

Back 30

c Major finance companies borrow on a continuous basis and have established borrowing relationships in direct money markets.