1. company (BHC) or financial holding company (FHC).
2. Completing a bank merger.
3. Making holding company acquisitions of nonbank businesses.

2.2 See if you can develop a good case for and against the regulation of financial institutions in the following areas:

1. Restrictions on the number of new financial-service institutions allowed to enter the industry each year.
2. Restrictions on which depository institutions are eligible for government-sponsored deposit insurance.
3. Restrictions on the ability of financial firms to underwrite debt and equity securities issued by their business customers.

1. Restrictions on the geographic expansion of banks and other financial firms, such as limits on branching and holding company acquisitions across state and international borders.
2. Regulations on the failure process, defining when banks and other financial firms are to be allowed to fail and how their assets are to be liquidated.

2-3

Consider the issue of whether or not the government should provide a system of deposit insurance. Should it be wholly or partly subsidized by the taxpayers? What portion of the cost should be borne by depository institutions? by depositors? Should riskier depository institutions pay higher deposit insurance premiums? Explain how you would determine exactly how big an insurance premium each depository institution should pay each year. When was the maximum value of federal deposit insurance last changed? By what amount?

2-5

Suppose the Fed purchases $500 million in government securities from a primary dealer. What will happen to the level of legal reserves in the banking system and by how much will they change?

2-8

What happens when a central bank like the Federal Reserve expands its assets? Is there any upper limit to a central bank's assets? Why?