Question
Find the current set of reserve requirements that banks must meet here(Links to an external site.)Links to an external site. .See the balance sheet of
- Find the current set of reserve requirements that banks must meet here(Links to an external site.)Links to an external site..See the balance sheet of Goliath National Bank below:
- Amounts on the balance sheet are in millions of dollars (you should not round to two decimals).
Assets
Liabilities + Capital
Reserves
$16.1
Transaction Deposits
$210
Loans
$168
Equity Capital
$20
Securities
$45.9
Total
$230
Total
$230
A. Calculate GNB's excess reserves.
B. Suppose that GNB sells $5 million in securities to get new cash. Show the bank's balance sheet after this transaction. What are the bank's excess reserves?
C. Suppose that GNB makes a loan to a customer equal to the number of its excess reserves from part b. Show the bank's balance sheet before the customer spends the proceeds of the loan. What are the bank's excess reserves?
2. In 1933, the Glass-Steagall Act mandated that investment and commercial banks must be legally separated - a bank could not engage in both investing and commercial banking activities.This requirement was repealed in 1999 by the Gramm-Leach-Bliley Act.There have been multiple efforts to reinstate Glass-Steagall inspired regulation since 2009.
What are the pros and cons of the Glass-Steagall Act? Do you think that that commercial and investment banks should be legally separated?
(Please make sure to cite the sources you consult.)
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