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This quiz consists of 5 multiple choice and 5 short answer questions through Section I. What Creature Is This? Chapter 4 Home Sweet Loan.

Multiple Choice Questions

1. When the entire banking system failed, what did the Federal government turn to to bolster the failed back up system?
(a) When the whole banking system collapsed, foreign investments went into bolstering the failed system back up.
(b) When the whole banking system collapsed, taxpayer money went into bolstering the failed system back up.
(c) When the whole banking system collapsed, the debt ceiling was raised to bolster the failed system back up.
(d) When the whole banking system collapsed, money from newly issued government bonds went into bolstering the failed system back up.

2. What risky loan activities have banks participated in?
(a) Banks loaned depositors' money out to poor people during the Great Depression.
(b) Banks loaned depositors' money out to risky debtors who would likely not be able to pay the loans off.
(c) Banks loaned depositors' money out to to the US government in times of economic downturns.
(d) Banks loaned depositors' money to foreign governments who refused to repay the loans.

3. What did the U.S. government do to support banks?
(a) The U.S. government guaranteed depositor money through the FDIC.
(b) The U.S. government guaranteed depositor money through Congress.
(c) The U.S. government guaranteed depositor money through private insurance companies.
(d) The U.S. government forgave the debot of failing banks.

4. The Federal Reserve System was designed to control what element of member banks?
(a) The Federal Reserve System was designed to control how much reserve cash any member bank had to keep on hand.
(b) The Federal Reserve System was designed to control a bank's cash flow.
(c) The Federal Reserve System was designed to control a bank's ability to make loans.
(d) The Federal Reserve System was designed to control how much reserve cash a bank can invest in its expansion.

5. Why has bank fraud never been eliminated?
(a) The Federal Reserve was influenced by lobbyists who advocated fraudulent regulations.
(b) The Federal Reserve was controlled by outside political interests that fostered fraud.
(c) The Federal Reserve tried to institute European standards which led to the perpetuation of fraud.
(d) Financial experts were taught that the way banking worked in the US was the only way it could work, and so the fraud kept on going.

Short Answer Questions

1. What may have contributed to the problems of the S&Ls in the 1980s?

2. When did the American public become interested in socialism as an alternative to capitalism?

3. How did many people feel about those who went too far into debt?

4. How was the nationalization of banks justified?

5. Who was the mastermind behind the Federal Reserve?

(see the answer key)

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