1. Many banks have been trying to push their customers away from checkable deposits and even savings deposits into small time deposits. Given the characteristics of these assets, why might banks want to do this? If interest paid to depositors represents the banks cost of funds, what has this move done to the banks cost of funds? How would new borrowers of auto loans or mortgages be affected by this move? Briefly defend your assertion.
2. Consumer mortgages are a type of bank loan that has a secondary market. Explain what this means in the context of viewing consumer mortgages as a capital market instrument. Why was this move granted by the Federal Reserve, given the role of consumer mortgages in society and with banks?