Question

	When banks made loans, they traditionally ____; in recent years, they have ________ the loans.
	A)	sold the loan to another financial institution; deposited
	B)	kept the loan on their own books; securitized
	C)	lent money at very low rates; set high-interest rates on
	D)	took deposits; originated

	Freddie Mac and Fannie Mae raise funds by:
	A)	issuing bonds.
	B)	taking savings deposits.
	C)	borrowing from the Treasury Department.
	D)	None of the answers are correct.

	Securitization benefits for banks include:
	A)	increased liquidity.
	B)	decreased diversification.
	C)	increased risk of default on individual loans.
	D)	None of the answers are correct.

	The 1994 Riegle-Neal Act repealed the ________ ban on ________.
	A)	Sherman Act's; monopolies
	B)	McFadden Act's; interstate banking
	C)	Monroe Doctrine's; interstate rail transportation
	D)	Sarbanes-Oxley Act's; corporate accounting trickery

	The creation of the financial holding company Citigroup was made possible by the passage of the:
	A)	Glass-Steagall Act.
	B)	Gramm-Leach-Bliley Act.
	C)	Sarbanes-Oxley Act.
	D)	Sherman Antitrust Act.

	Freddie Mac and Fannie Mae raise funds by:
	A)	issuing bonds.
	B)	taking savings deposits.
	C)	borrowing from the Treasury Department.
	D)	None of the answers are correct.

Answer 1

1. Option B when banks made loans they traditionally keep the loans on their own books; in recent years, they have securitized the loans. Banks may securitize debt for several reasons including risk management, balance sheet issues, greater leverage of capital and to profit from origination fees. Debt is securitized by pooling certain types of debt instruments and creating a new financial instrument from the pooled debt

2.Option A issuing bonds.They raise funds by selling bonds (that the gov. guarantees) and uses the funds to buy mortgages from the banks.

3. Option A increased liquidity. Securitization involves taking an illiquid asset (or group of assets) and consolidating with other assets in an effort to create a more liquid asset that can be sold to another party

4.,Option B 1994 Riegle-Neal Act Repealed the McFadden Act's ban on interstate banking.Today banks can expand around the country.