1. Which of the following did NOT actually occur as part of the Troubled Asset Relief program?
aided homeowners who were having trouble making payments on mortgages.
the government purchased shares in commercial banks.
purchased "bad" assets from banks.
provided aid to the auto industry.
2. Which of the following best describes why large, or systematically significant, banks are required to hold higher levels of capital by the Dodd Frank Act?
Higher levels of capital increase risk of insolvency, but large banks can likely weather crisis better than small banks.
Higher levels of capital increase profitability and this is ultimately better for shareholders.
Higher levels of capital reduce the risk of insolvency. Since it is very costly to bail out large banks and even more costly to let them fail, large banks are required to hold more capital.
Since lower levels of capital increase returns on equity, big banks are required to hold more capital to keep them from having an unfair advantage over small banks that may be less profitable.
3. In addition support from the U.S. government through TARP funds, financial institutions received support from the Federal Reserve. You can read about Federal Reserve programs here.
Which non-bank institution received a loan from the Federal Reserve?
Blue Cross - a health insurance company
all of these
American International Group (AIG) - an insurance company
General Motors (GM) - an auto producer
4. Read about the Troubled Asset Relief Program (TARP) here.
Which non-financial industry received TARP funds?
the auto industry
none, all funds were used to support financial firms
the construction industry
the health insurance industry