These questions pertain to the previous two lectures (November 13 and 20).
Why are a bank's liabilities said to be its sources of funds? Why are a bank's assets said to be its uses of funds?
Why would government regulators and taxpayers like banks to have high net worth?
Describe the types of risk that banks face.
How do banks try to reduce credit risk?
What are floating rate loans? How do they help to reduce the interest rate risk for banks?
What are the major types of off-balance sheet activities in which banks engage? Why have banks been involved in more of these activities recently and less in traditional banking?
Suppose that banks collectively have not managed their exposure to interest rate risk well and that market interest rates increase and become more volatile. What do you predict will happen to the value of the equity capital in the banking industry? To the number of bank failures?
Suppose that Ann, who has an account at First Bank, writes a check for $1000 to Bill, who has an account at Melon Bank. When the check clears, how have the balance sheets of First and Melon been affected?
If you were a banker who believed that interest rates were going to rise, what would you try to do with your bank's portfolio?
What are credit scores and how are they computed?
See this article about the City of Leeds' efforts to obtain a $22.5 million line of credit (from the Jefferson County Commission) to attract a commercial and residential project. The county, which is overextended in such funding for such projects, is likely to reject the request. What would be the advantages and disadvantages if Leeds' accessed funds through the private sector? Is there significant default, credit, and interest rate risk? Which funding source would taxpayers prefer? And, how does the lack of interest on the part of the Jefferson County Commission reflect the opportunity cost of the proposed $1 billion dome project planned for downtown Birmingham?
Explain the US banking system before from 1787 to 1861. Why was the Hamiltonian banking system considered controversial? What type of regulatory structure were free banks subject to? What types of banks received state charters? What is dual banking?
Why was the Secret Service created? What effect on banking in the U.S. did the National Bank Act of 1863 have? What effect on banking did the Federal Reserve Act of 1913 have?
Why was Glass Steagall passed? Did it make the banking system in the US more competitive? What effect did it have on the demand curve for banking services?
What motivated Congress to pass deposit insurance legislation in the 1930s? How much was the original insurance coverage? Was the system intended to operate like an insurance program, with premiums paid by banks?
What was the McFadden Act? What factors contributed to the weakening of this Act? What role was played by holding companies?
Why were banks forbidden from paying interest up until 1970? What problems did this cause the banking industry before the 1970s? How did the government try to rectify these problems?
What is a credit crunch? What is disintermediation?
Why did Congress pass DIDMCA in 1980? What did it do?
What is universal banking? What are some advantages and disadvantages to universal banking? Can the banking system in the US today be characterized by universal banking?
Define: Return on Assets, Return on Equity, and Net Interest Margin? Look at this data on ROA, ROE, and NIM. Why is the significantly ROE larger?
(Here are some examples. Here is a list of average annual return on assets since 1934. Here is a list of bank failures, by year, from 1934 to 2003.)
What are the objectives of bank regulation? How are they contradictory?
How many banks fail each year, on average? Why? Should we conclude that the remaining banks run efficiently?
Here is the FDIC's page on Wal-Mart's application to start a bank from earlier this year. It was eventually rejected. Here and here are articles about the effort.
What is the "too big to fail doctrine"? Here and here are article about this doctrine applied to the case of Continental Illinois (as discussed in class and in our text).
Why were banks easy to blame for the Great Depression?
True, false, and explain: The dominant view today among economists is that the banks caused the Depression.
What are central banks and where do they come from?
What are the macroeconomic goals of the U.S. Federal Reserve? Explain in detail the purpose of Humphrey-Hawkins.
Why is price stability considered such an important goal relative to others? How successful has the Fed been in pursuing this goal?
What are the major assets and liabilities of the Federal Reserve System? Describe each briefly.
Explain how the Fed sets the reserve ratio. Are the reserve ratio and the money supply positively or inversely related? Define: excess reserves and fully loaned institution.
What is the money multiplier and how is it related to the money supply and the monetary base?
Define open market operations. How does the Fed know how much money it needs to increase (decrease) the monetary base through open market operations?
If the Fed wants to increase the money supply, should it make an open market purchase or sale? Should it make more discount loans or fewer? If the Fed wants to decrease the money supply, what should it do?
If a bank has $10,000 in excess reserves, what is the most new lending that it should do? Why shouldn't it do more than that amount?
A student remarks, "If any one bank can safely loan only an amount equal to its excess reserves, I don't understand how the banking system as a whole can loan out an amount equal to several times the initial excess reserves in the system." Resolve this seeming paradox.
What are dynamic and defensive transactions in open market operations?
Explain discount policy. What are its advantages (from the point of view of the Fed?)
Explain and give examples of adjustment, seasonal, and extended credits. Explain its use creating announcement effects.
Explain how the Fed uses margin requirements to achieve its goals. (Here is my article comparing asset bubbles in the 1920s and the 1990s.) What is moral suasion?
Why are a bank's liabilities said to be its sources of funds? Why are a bank's assets said to be its uses of funds?
Why would government regulators and taxpayers like banks to have high net worth?
Describe the types of risk that banks face.
How do banks try to reduce credit risk?
What are floating rate loans? How do they help to reduce the interest rate risk for banks?
What are the major types of off-balance sheet activities in which banks engage? Why have banks been involved in more of these activities recently and less in traditional banking?
Suppose that banks collectively have not managed their exposure to interest rate risk well and that market interest rates increase and become more volatile. What do you predict will happen to the value of the equity capital in the banking industry? To the number of bank failures?
Suppose that Ann, who has an account at First Bank, writes a check for $1000 to Bill, who has an account at Melon Bank. When the check clears, how have the balance sheets of First and Melon been affected?
If you were a banker who believed that interest rates were going to rise, what would you try to do with your bank's portfolio?
What are credit scores and how are they computed?
See this article about the City of Leeds' efforts to obtain a $22.5 million line of credit (from the Jefferson County Commission) to attract a commercial and residential project. The county, which is overextended in such funding for such projects, is likely to reject the request. What would be the advantages and disadvantages if Leeds' accessed funds through the private sector? Is there significant default, credit, and interest rate risk? Which funding source would taxpayers prefer? And, how does the lack of interest on the part of the Jefferson County Commission reflect the opportunity cost of the proposed $1 billion dome project planned for downtown Birmingham?
Explain the US banking system before from 1787 to 1861. Why was the Hamiltonian banking system considered controversial? What type of regulatory structure were free banks subject to? What types of banks received state charters? What is dual banking?
Why was the Secret Service created? What effect on banking in the U.S. did the National Bank Act of 1863 have? What effect on banking did the Federal Reserve Act of 1913 have?
Why was Glass Steagall passed? Did it make the banking system in the US more competitive? What effect did it have on the demand curve for banking services?
What motivated Congress to pass deposit insurance legislation in the 1930s? How much was the original insurance coverage? Was the system intended to operate like an insurance program, with premiums paid by banks?
What was the McFadden Act? What factors contributed to the weakening of this Act? What role was played by holding companies?
Why were banks forbidden from paying interest up until 1970? What problems did this cause the banking industry before the 1970s? How did the government try to rectify these problems?
What is a credit crunch? What is disintermediation?
Why did Congress pass DIDMCA in 1980? What did it do?
What is universal banking? What are some advantages and disadvantages to universal banking? Can the banking system in the US today be characterized by universal banking?
Define: Return on Assets, Return on Equity, and Net Interest Margin? Look at this data on ROA, ROE, and NIM. Why is the significantly ROE larger?
(Here are some examples. Here is a list of average annual return on assets since 1934. Here is a list of bank failures, by year, from 1934 to 2003.)
What are the objectives of bank regulation? How are they contradictory?
How many banks fail each year, on average? Why? Should we conclude that the remaining banks run efficiently?
Here is the FDIC's page on Wal-Mart's application to start a bank from earlier this year. It was eventually rejected. Here and here are articles about the effort.
What is the "too big to fail doctrine"? Here and here are article about this doctrine applied to the case of Continental Illinois (as discussed in class and in our text).
Why were banks easy to blame for the Great Depression?
True, false, and explain: The dominant view today among economists is that the banks caused the Depression.
What are central banks and where do they come from?
What are the macroeconomic goals of the U.S. Federal Reserve? Explain in detail the purpose of Humphrey-Hawkins.
Why is price stability considered such an important goal relative to others? How successful has the Fed been in pursuing this goal?
What are the major assets and liabilities of the Federal Reserve System? Describe each briefly.
Explain how the Fed sets the reserve ratio. Are the reserve ratio and the money supply positively or inversely related? Define: excess reserves and fully loaned institution.
What is the money multiplier and how is it related to the money supply and the monetary base?
Define open market operations. How does the Fed know how much money it needs to increase (decrease) the monetary base through open market operations?
If the Fed wants to increase the money supply, should it make an open market purchase or sale? Should it make more discount loans or fewer? If the Fed wants to decrease the money supply, what should it do?
If a bank has $10,000 in excess reserves, what is the most new lending that it should do? Why shouldn't it do more than that amount?
A student remarks, "If any one bank can safely loan only an amount equal to its excess reserves, I don't understand how the banking system as a whole can loan out an amount equal to several times the initial excess reserves in the system." Resolve this seeming paradox.
What are dynamic and defensive transactions in open market operations?
Explain discount policy. What are its advantages (from the point of view of the Fed?)
Explain and give examples of adjustment, seasonal, and extended credits. Explain its use creating announcement effects.
Explain how the Fed uses margin requirements to achieve its goals. (Here is my article comparing asset bubbles in the 1920s and the 1990s.) What is moral suasion?
posted by Chris at 5:19 PM
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