Chapter 2The Impact of Government Policy and Regulation on the Financial-Services IndustryFill in the Blank Questions1.The _ was created as part of the Glass Steagall Act. In the beginning it insured deposits up to $2,500. Answer: FDIC 2.The_ is the law that states that a bank must get approved from their regulatory body in order to combine with another bank. Answer: Bank Merger Act 3.One tool that the Federal Reserve uses to control the money supply is _ . The Federal Reserve will buy and sell T-bills when they are using this tool of monetary policy. Answer: open market operations 4.The_ was created in 1913 in response to a series of economic depressions and failures. Its principal role is to serve as the lender of last resort and to stabilize the financial markets. Answer: Federal Reserve 5.The _ prevented banks from crossing state lines and made national banks subject to the branching laws of their state. This act was later repealed by the Riegle Neal Interstate Banking law.Answer: McFadden-Pepper Act 6.Because the FDIC levies fixed insurance premiums regardless of risk, this leads to a problem called the _ among banks. The fixed premiums encourage all banks to accept greater risk. Answer: moral hazard 7.In 1980, _ was passed and lifted government ceilings on deposit interest rates in favor of free market interest rates. Answer: DIDMCA 8.One tool that the Federal Reserve uses to control the money supply is _. The Federal Reserve will change the interest rate they charge for short term loans when they are using this tool of monetary policy. Answer: changing the discount rate 9.The first major federal banking law in the U.S. was the _. This law was passed during the Civil War and set up a system for chartering national banks and created the OCC. Answer: National Banking Act 10.The_ was passed during the Great Depression. It separated investment and commercial banks and created the FDIC. Answer: Glass-Steagall Act 11.The_ brought bank holding companies under the jurisdiction of the Federal Reserve. Answer: Bank Holding Company Act 12.The_ allows bank holding companies to acquire banks anywhere in the United States. However, no one bank can control more than 30 percent of the deposits in any one state or more than 10 percent of the deposits across the country. Answer: Riegle-Neal Interstate Banking Act 13.The allows banks to affiliate with insurance companies and securities firms either through a holding company or as a subsidiary. Answer: Gramm-Leach-Bliley Act (Financial Services Modernization Act) 14.Customers of financial-service companies may _ of having their private information shared with a third party such as a telemarketer. However, in order to do this they must tell the financial-services company in writing that they do not want their personal information shared with outside parties. Answer: opt out 15.The federal bank regulatory agency which examines the most banks is the _. Answer: FDIC 16.The _ requires financial service companies to report suspicious activity in customer accounts to the Treasury Department. Answer: U.S. Patriot Act 17.The central bank of the new European Union is known as the _. Answer: European Central Bank or ECB 18.The _ Act prohibits banks and other publicly owned firms from publishing false or misleading financial performance information. Answer: Sarbanes-Oxley 19. One of the main roles of the Federal Reserve today is . They have three tools that they use today to carry out this role; open market operations, the discount rate and legal reserve requirements.Answer: monetary policy20. The is the center of authority and decision making within the Federal Reserve. It consists of seven members appointed by the president for terms not exceeding 14 years.Answer: Board of Governors21. The main regulators of insurance companies are .Answer: state insurance commissions22. Federal Credit Unions are regulated and examined by .Answer: the National Credit Union Administration.23. The makes it easier for victims of identity theft to file fraud alerts and allows the publ