The Federal Reserve of the United States has done which of the following to its balance sheet in response to the financial crisis of 2007-2009:

Made loans to the U.S. Treasury

Decreased bank reserves by selling treasury securities.

Increased its assets and its liabilities

Created inflation

2. 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

3. As the receiver of a failed bank the FDIC has the authority to arrange for a solvent bank to acquire the assets and liabilities of the failed bank.

True

False

4. The insurance risk premium charged by the FDIC to banks is independent of the risk of the bank. This is a major weakness in bank regulations. A risky bank pays the same premiums as a safer bank.

True

False

5. As the receiver of a failed bank the FDIC has the authority to arrange for a solvent bank to acquire the assets and liabilities of the failed bank.

True

False

6. The FDIC sold Frontier Bank to Union Bank of San Francisco because Union's bid was the highest and this sale was less costly than liquidation of Frontier.

True

False