SOLVED

15.3Â Â Regulation of Nondepository Financial Intermediaries 1) This basic pattern emerges in the United States: financial institutions are more heavily regulated A) the smaller is their typical contributor. B) the larger is their typical contributor. C) the riskier are their assets. D) the larger they are in total asset size. 2) The smaller the typical depositor at a financial institution, the __________ likely that some of the institution’s deposits are federally insured and thus the __________ heavily that institution tends to be regulated. A) less; less B) less; more C) more; less D) more; more 3) In order to manage risk of failure and protect guarantors, the Employee Retirement income Security Act (ERISA) established all of the following requirements on pension funds except for minimum A) disclosure of information. B) reporting requirements. C) investment standards. D) risk-based capital requirements. 4) The motivation behind mutual fund regulation is protection of individual investors through A) risk-based capital requirements. B) full financial disclosure. C) insurance of investors accounts. D) performance of periodic audits by the SEC. 15.4Â Â Where Securities Market and Banking Regulation Meet: The Glass-Steagall Act, A Collapsing Barrier 1) The Glass-Steagall Act became law in the A) 1890s. B) 1910s. C) 1930s. D) 1950s. 2) The Glass-Steagall Act forbids banks from owning A) municipal bonds. B) corporate stock. C) home mortgages. D) bonds issued by foreign governments. 3) Behind the Glass-Steagall Act was the feeling that __________ is too risky for commercial banks. A) underwriting corporate securities B) competing to pay high deposit rates C) making business mortgage loans D) interstate branching 4) In the 1960s, banks started __________ in order to maneuver around the Glass-Steagall act. A) opening foreign branches B) using Section 20 affiliates C) forming one-bank holding companies D) dropping Federal Reserve membership 5) The Gramm-Leach-Bliley Act A) has allowed affiliates of financial holding companies to engage in commercial and investment banking. B) provides for the regulation of holding company affiliates by functional supervisors such as the SEC. C) designates the Federal Reserve as the “umbrella” regulator. D) All of the above. 6) Combining commercial banking and investment banking in the same organization produces a risk for that organization A) that must be above that of investment banking. B) that is the same as investment banking, the riskier of the two activities. C) somewhere in between the risk of the two activities. D) that may be below that of commercial banking. 7) “Universal banking” can lower the risk of participating financial institutions if A) there is high correlation in the returns of the permitted activities. B) there is low correlation in the returns of the permitted activities. C) there are firewalls between all the permitted activities. D) none of the customers of the institution are federally insured.