1 1because bank funding markets are global and have at

Assignment Help Business Economics
Reference no: EM13375438

1. 1. Because bank funding markets are global and have at times broken down, disrupting the provision of credit to households and businesses in the United States and other countries, the Federal Reserve has entered into agreements to establish central bank liquidity swap lines with a number of foreign central banks. Two types of swap lines were established: dollar liquidity lines and foreign-currency liquidity lines. The swap lines are designed to improve liquidity conditions in dollar funding markets in the United States and abroad by providing foreign central banks with the capacity to deliver U.S. dollar funding to institutions in their jurisdictions during times of market stress. Likewise, the swap lines provide the Federal Reserve with the capacity to offer liquidity in foreign currencies to U.S. financial institutions should the Federal Reserve judge that such actions are appropriate. These arrangements have helped to ease strains in financial markets and mitigate their effects on economic conditions. The swap lines support financial stability and serve as a prudent liquidity backstop.
True
False

2. Prior to its failure Washington Mutual Bank was not required to maintain certain minimum capital ratios. Regulators were entirely focused on the liquidity conditions of banks.
True
False


3.It is not possible for a bank to be solvent but illiquid.

True
False

4. When WAMU failed the investors who had purchased MBS backed by mortgages originated by WAMU lost all their investment in these MBS because the MBS were unsecured liabilities of WAMU.
True
False

5. In 2007 Washington Mutual Inc. was unable to raise tier 1 capital. This was because its subsidiary Washington Mutual Bank was already insolvent by the fourth quarter of 2006.
True
False

6. According to the FCIC report WaMu was forced to write off $1.9 billion for the fourth quarter of 2007 and another $1.1 billion in the first quarter of 2008, mostly related to its portfolio of option ARMs. These write-offs reduced the bank's capital levels.
True
False

7. Subprime assets lost value rapidly between 2007 and 2009. This lowered the value of banks that had exposure to these assets and financial institutions that had exposure to banks that were exposed to subprime risk. Since the assets were hard to value they were not acceptable as collateral. This made banks illiquid and this scared away the suppliers of bank capital. A liquidity crisis turned into a credit crisis for many financial institutions such as WAMU, Wachovia, Lehman and others.
True
False

8. 1. The amount of funds supplied by money market funds via repo transactions to Lehman Brothers dropped dramatically between 3/7/2008 and 3/14/2008.
True
False
2.94118 points 

9. When the value of a bank assets declines this reduces the bank's capital levels. This makes the bank's debt riskier. This increases the bank's cost of equity.
True
False

10. The Federal Reserve's balance sheet included more than $15 billion worth of asset denominated in foreign currencies as of April 30th 2013.

11. According to the Financial Crisis Inquiry Report (FCIC) WAMU mortgage brokers originated option ARMS without understanding the implications these mortgage instruments had on the solvency of the borrowers. Both brokers and households were being duped by the investment bankers in New York. 
True
False


12. Fidelity money market funds were lending over $10 billion to Lehman Brothers as of 9/5/2008.
True
False

13. In September of 2008, the FDIC paid JP Morgan Chase to purchase all of the assets of and assume all of the liabilities of Washington Mutual Bank. This was an outright bailout of a private company by the FDIC. What makes this more problematic is that uninsured creditors were compensated by the FDIC.
True
False

14. WAMU managers knew that option ARMS were high risk assets so they sold all of the option ARMS they originated via securitization transactions. They did not own Option ARMS in the fall of 2008.
True
False

15. The Board of Governors of Federal Reserve objected to Citigroup's capital plan in its 2014 Comprehensive Capital Analysis Review because Cititgroup had excessive exposure to the debt of Greece and other European countries that were in fiscal difficulty. 
True
False 

Reference no: EM13375438

Questions Cloud

Discuss the reasons for yahoos proposed acquisition of : discuss the reasons for yahoos proposed acquisition of tumbler. has it been successful? how much will yahoo receive
Length 1500 wordsinstructions write an essay on one of the : length 1500 wordsinstructions write an essay on one of the two topics given below. for this essay you will need to use
Fundamental economic concepts please respond to the : fundamental economic concepts please respond to the followinganswer the following discussions based on the katrinas
How would you paraphrase the definition of equilibrium : how would you paraphrase the definition of equilibrium price?equilibrium price occurs when supply and demand quantities
1 1because bank funding markets are global and have at : 1. 1.because bank funding markets are global and have at times broken down disrupting the provision of credit to
Cholati is a foreign corporation that produces fine : cholati is a foreign corporation that produces fine chocolates for sale worldwide. cholati markets it chocolates in the
Instructions write a review of beverly silvers forces of : instructions write a review of beverly silvers forces of labor. since the review will be short you need to think
Tenco a domestic corporation manufactures tennis rackets : tenco a domestic corporation manufactures tennis rackets for sale in the united states and abroad. tenco owns 100 of
Purpose covers a range of important cost and management : purpose covers a range of important cost and management accounting topics. the main purpose of this assignment is to

Reviews

Write a Review

Business Economics Questions & Answers

  Economics assignment

This document contains various important questions and their appropriate answers in the subject field of Economics.

  Demand and supply curves

Economics is the study of the principles governing the allocation of scarce means among competing ends when the objective of the allocation is to maximize the attainment of the ends.

  Long-run perfectly competitive equilibrium for the firm

Evaluate Government intervene and correct this situation?(a) Explain the concept of a concentration ratio. A rise in the price of magarine Explain the impact of external costs and external benefits on resource allocation long-run perfectly c..

  Supply and demand diagrams

Explain each of the following using supply and demand diagrams,  With the use of a graph, explain how these two programs affect cigarette consumption and the price of cigarettes.

  Case study: fisher-price toys

The case study of the Fisher-Price Toys, Inc., a popular case in basic economics and management from the prestigious Harvard Business School.

  Draw the production possibility curve

Draw the production possibility curve and a. Define consumer surplus and producer surplus.

  Tax revenue

The Australian government administers two programs that affect the market for cigarettes

  Maximize total welfare

How many tickets to sell to maximize total welfare.

  Difference between the cv and the ev

The change in consumer surplus (?CS) is not "theoretically" justifiable like the CV and EV but it continues to be the most widely used measure of consumer welfare change. Explain how this can be reconciled

  Depict von neumann-morgenstern utility index u in a diagram

Depict the von Neumann-Morgenstern utility index u in a diagram

  What is the market solution

What is the market solution (market price and quantity) and What is the total surplus of the society under the market solution

  Calculate gross national product and net national product

Calculate gross national product and net national product

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd