Banking and Monetary Policy_Butkiewicz_Date__031810

Banking and Monetary Policy_Butkiewicz_Date__031810 -...

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Chapter 7 continued 22: moral hazard- after loan was made - Adverse selection- before loan was made - 24: to really understand a firms business you have to spend a lot of time/effort and even money 25: if you can get one person to do the work the others will use it to their advantage and be free riders - Example: park community clean up vs. sleeping 26: nuclear electricity plan examples 27: credit default swaps- type of insurance (most sold in world= AIG) - Concerned about ratings (should be regulated?) 29: each of these types of securities generates an income stream 30: captive board- if outside company is involved with managers then company will do what managers say to help their business 33: how many new IPOs
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Unformatted text preview: -French/German= weak shareholder rights-English= most supportive of way market systems work well 35: take company not doing well, buy it, try to fix it, resell it 37: have to publish public regular reports if a big change occurs have to make special report (SEC) 40: SOX passed after Anderson/Enron/WorldCom scandal 42: insider trading= illegal 44: ask a lot of questions 46: will pay bills because don’t trust you and want to protect their money 47: increase risk= increase rate-Can borrow at prime + 1, 1.5, 2, etc.-Credit rationing—too great of a risk 48: want borrowers to have a stake so you are less likely to pay for default loan 51: worked until realized rates were going up 55: investors- issuing securities= very high...
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Banking and Monetary Policy_Butkiewicz_Date__031810 -...

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