Chapter 5

Chapter 5 Current Multinational Financial Challenges: The Credit Crisis of 2007-2009 Multiple Choices 5.1 The Seeds of Crisis: Sub-Prime Debt 1) Investment banks and stock brokerages have traditionally been regulated by the A) Federal Reserve System (FED). B) Federal Deposit Insurance Corporation (FDIC). Securities and Exchange Commission (SEC). D) Internal Revenue Service (IRS). 2) The Glass-Steagall Act of 1933 separated commercial banking activities from investment banking activities. - B) created the Federal Reserve System. C) developed the system of commercial bank deposit insurance. D) all of the above 3) Which of the following is NOT another term for a prime mortgage loan? A) Conventional loan. Top-qual loan. C) Conforming loan. D) All of the above are suitable terms for a prime mortgage loan. 5.2 The Transmission Mechanism: Securitization and Derivatives of Securitized Debt 1) The process of turning an illiquid asset into a liquid saleable asset is called A) swapping B) wrapping C) securitization D) creationism 2) Asset-backed securities (ASBS) may be securitized based on A) auto loans B) home-equity loans C) credit card receivables D) all of the above is a financial intermediation device that allowed the participant to borrow 3) A short and lend long. A) sub-prime loan B) structured investment vehicle C) non-conforming loan D) all of the above