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Question 1

1. Prime brokerage accounts were moved from Bear Stearns during the week of 2010. This was part of the run. These accounts were closed so Bear no longer had access to the funds deposited by their prime brokerage customers for use as working capital.

   True

   False

4.54545 points

Question 2

1. Data on interest rates from the Board of Governors of the Federal Reserve

   The spread between the yield on 3 month financial commercial paper and 3 month constant maturity treasury security was 250 basis points in 10/2008.

   True

   False

4.54545 points

Question 3

1. Between October 1873 and March 1879 currency in circulation increased relative to bank deposits. There was a run on checking accounts.

   True

   False

4.54545 points

Question 4

1. The Financial Crisis Inquiry Commission (FCIC) concluded that compensation schemes at financial institutions leading into the financial crisis years of 2007-2009 created incentives for mangers to take excessive risk. In other words the corporate governance of large financial institutions increased moral hazard rather than reduce it.

   True

   False

4.54545 points

Question 5

1. During the crisis of 2007-2008 market participants lost confidence in money market instruments issued by financial institutions.

   True

   False

4.54545 points

Question 6

1. In the United States Federal Deposit Insurance prevented bank runs in 1933.

   True

   False

4.54545 points

Question 7

1. The deposit insurance administered by the FDIC has not been successful and proof of this is the banking crisis of 2008.

   True

   False

4.54545 points

Question 8

1. Gorton discusses runs on banks that happened from 1873 to 1913. Runs in this period were always accompanied by a drop in pig iron production. Pig iron production is a proxy used for industrial output in these years.

   True

   False

4.54545 points

Question 9

1. Gorton argues that financial crises are a result of market participants losing confidence in the value of bank debt.

   True

   False

4.54545 points

Question 10

1. The Financial Crisis Inquiry Commission (FCIC) concluded that leverage was the primary cause of the financial crisis of 2007-2009. They found no evidence that bad management of financial institutions was a contributing factor to the crisis.

   True

   False

4.54545 points

Question 11

1. According to Groton, financial crises are always predictable if regulators monitor the cash to deposit ratio carefully. Financial crisis develop slowly over months and sometimes years to playout.

   True

   False

4.54545 points

Question 12

1. Financial Accounts of the United States

   Z1/Z1/FA664090005.Q 1946Q4 2015Q2 275 Security brokers and dealers; total financial assets

   Z1/Z1/FA662151003.Q 1946Q4 2015Q2 275 Security brokers and dealers; security repurchase agreements; liability

   Z1/Z1/FA663168005.Q 1946Q4 2015Q2 275 Security brokers and dealers; depository institution loans n.e.c.; liability

   Between the first quarter of 2005 and the fourth quarter of 2011 the financial assets financed by security brokers and dealers in the United States and the security and repurchase agreements used by these institutions were positively correlated.

   True

   False

4.54545 points

Question 13

1. The Financial Crisis Inquiry Commission (FCIC) concluded that many of the financial institutions at the center of the financial crisis were ineffectively managed.

   True

   False

4.54545 points

Question 14

1. A flight to quality is when large numbers of investors sell or liquidate significant amounts of risky assets and use the proceeds to buy risk free assets.

   True

   False

4.54545 points

Question 15

1. Data on interest rates from the Board of Governors of the Federal Reserve

   The spread between the yield on 3 month financial commercial paper and 3 month constant maturity treasury security was 26 basis points in 6/2005.

   True

   False

4.54545 points

Question 16

1. When financial institutions attempted to liquidate assets to repay maturing money market instruments over the period form 2007-2008 the result was downward pressure on asset prices causing the run on money market instruments to worsen.

   True

   False

4.54545 points

Question 17

1. Paul McCulley, a managing director at PIMCO increased his companys exposure to subprime risk in the period 2005-2006 in order to take advantage of the high yields offered in the market.

   True

   False

4.54545 points

Question 18

1. Financial Accounts of the United States

   Z1/Z1/FA664090005.Q 1946Q4 2015Q2 275 Security brokers and dealers; total financial assets

   Z1/Z1/FA662151003.Q 1946Q4 2015Q2 275 Security brokers and dealers; security repurchase agreements; liability

   Z1/Z1/FA663168005.Q 1946Q4 2015Q2 275 Security brokers and dealers; depository institution loans n.e.c.; liability

   During the fourth quarter of 2007 financial assets on the balance sheets of security brokers and dealers in the United States declined by $785.68 billion.

   True

   False

4.54545 points

Question 19

1. There was a run on Bear Stearns in during the week of March 10^th 2008.

   True

   False

4.54545 points

Question 20

1. Financial Accounts of the United States

   Z1/Z1/FA664090005.Q 1946Q4 2015Q2 275 Security brokers and dealers; total financial assets

   Z1/Z1/FA662151003.Q 1946Q4 2015Q2 275 Security brokers and dealers; security repurchase agreements; liability

   Z1/Z1/FA663168005.Q 1946Q4 2015Q2 275 Security brokers and dealers; depository institution loans n.e.c.; liability

   During the fourth quarter of 2008 financial assets on the balance sheets of security brokers and dealers in the United States declined by $535.033 billion.

   True

   False

4.54545 points

Question 21

1. Financial Accounts of the United States

   Z1/Z1/FA664090005.Q 1946Q4 2015Q2 275 Security brokers and dealers; total financial assets

   Z1/Z1/FA662151003.Q 1946Q4 2015Q2 275 Security brokers and dealers; security repurchase agreements; liability

   Z1/Z1/FA663168005.Q 1946Q4 2015Q2 275 Security brokers and dealers; depository institution loans n.e.c.; liability

   Depository institution lending to security brokers and dealers in the United States increased in the third quarter of 2008.

   True

   False

4.54545 points

Question 22

1. Data on interest rates from the Board of Governors of the Federal Reserve

   3-month financial commercial paper (H15/H15/RIFSPPFAAD90_N.M)

   3-month Treasury constant maturity (H15/H15/RIFLGFCM03_N.M)

   The spread between the yield on 3 month financial commercial paper and 3 month constant maturity treasury security was 27 basis points in 12/2006.

   True

   False

4.54545 points

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