28 true/false

1.The authors of the text argue that positive stereotypes of financiers - e.g., that they are like rocket scientists - are just as flawed as are negative stereotypes.

2.Among the purposed that financial markets serve is to allocated capital and to share risk.

3.Lenders include households and businesses, but anyone, or any firm, that is a lender cannot also be a borrower.

4."Primary" markets are where people trade their stocks and bonds with one another, such as the New York Stock Exchange.

5.As a general rule, savers would like to invest in riskless instruments that yield high returns and are highly liquid.

6.Deposit insurance will pay a bank when a loan, taken out by one of its depositors, is defaulted on.

7.The idea that regulators are "captured" by the industry that they regulate is associated with economist George Stigler.

8.Blue Sky laws are perhaps the clearest example of government legislation that perfectly serves the public interest to protect consumers.

9.According to the authors of the text, one of the few actions taken by the government that actually reduced the seriousness of the Great Depression was the raising of tariffs.

10.The "too-big-to-fail" policy is used to justify bailing out large, unsound, banks (and other types of businesses).

11.The futures trading pits that were closing down were in Chicago and New York.

12.Although unusual, a CDS can involve payments made even after the bond's maturity date has passed.

13.Credit default swaps have been described as essentially insurance policies.

14.According Alloway, index based credit default swaps suffer from the inability to hedge against specific defaults.

15.Murphy argues that the fact that over 100% of GameStop stock had been shorted was not especially problematic as the borrowed shares are sold to new owners, who are free to lend them out to another short-seller.

16.A speculator that goes short can borrow money to buy stock; one that goes long borrows stock to buy money.

17.AIG lost almost ten percent of the total value of their assets in 2008.

18.While AIG lost some $30 billion because of the collapse of their credit default swaps, they lost an additional $21 from their securities lending activity.

19.The problem with AIG's involvement in the CDS market is that they were really only buyers and not sellers.

20.The Federal Reserve's loan to AIG came with a steep price tag - the Fed became owners of 51% of AIG.

21.One day after Treasury Secretary Paulson said that there would be no more bailouts of Wall Street firms, they bailed out AIG.

22.One of the perplexing issues surrounding the First National Bank of Keystone is that when officials from the OCC came to audit the bank they were treated well and thrown lavish parties.

23.First National Bank of Keystone's founder J. Knox McConnell employed an all-women workforce known as "Knox's Foxes."

24.The First National Bank of Keystone used the motto of "Time Tired, Panic Tested."

25. Just before failing, about $21 billion of Continental Illinois' $28 billion in deposits were over the $100,000 insured limit provided by the FDIC.

26.While the FDIC protected all depositors at Continental Illinois, bondholders and stockholders were virtually wiped out.

27.According to McKenna, based on her experience at Continental Illinois, an internal audit that points out problems rarely gets to top management if it means slowing down revenue growth.

28. Penn Square Bank began as an inner-city bank in Philadelphia, catering mostly to middle class home owners.