FinMktHW3 - Financial Markets & Institutions Module 3...

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Module 3 Homework Page 442: 1) Savings institutions balance sheets will hold more of their assets in mortgages and mortgage backed securities, whereas commercial banks will have a much more diversified asset set. 2) Congress deregulated interest rates which opened potential asset, liability and interest rate risks for savings institutions. It was recommended to have a mix of supervision and liberal regulation, but politicians didn’t listen. Interest rates rose sharply in the lat 70’s/early 80’s that lead to an asset/liability crisis at the institutions. It would take until almost the end of the 80’s before the institutions could fully recover with help from new federal government bills and regulations. 6) Savings institutions main assets are based in mortgages and other mortgage backed securities. Their liabilities are mainly based in customer deposits. 9) When a savings institution is a mutual organization, it is usually backed by a federal or state government to provide its customers with security for their savings while investing in securities. 13) Credit unions are non-profit cooperatives owned by members and governed by a board of directors elected by the members. Credit unions accept deposits from members and use them for short-term loans. Savings Institutions are more specialized for real estate financing. Si’s are backed by a state or the federal government. 15) A Credit Union’s main assets are its loans and its main liabilities are the deposits by its members. 16) Credit Unions are regulated by either state or federal governments. 18) The three types are sales finance institutions, personal credit institutions and business credit institutions. Finance companies differ from commercial banks because they rely on short and long term borrowing instead of deposits. Their assets are mainly from business and consumer loans. Since they are heavy borrowers in the credit market, they tend to hold more equity to assets as well. 19)
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This note was uploaded on 07/12/2011 for the course BUS 101 taught by Professor Noname during the Spring '11 term at Albany State University.

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FinMktHW3 - Financial Markets & Institutions Module 3...

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