Indicate whether the following statements are true or false. 1. From 1933 until
ID: 1116985 • Letter: I
Question
Indicate whether the following statements are true or false.
1. From 1933 until the financial crisis of 2008 there was a continuous trend toward stricter and more pervasive government regulation, especially in markets dealing with financial derivatives.
2. The Troubled Asset Relief Program (TARP) initiated in 2008 was created by the Federal Reserve System so that it could directly purchase mortgage backed securities and other “troubled assets.”
3. During the Financial Crisis of 2008 the Federal Reserve System directly took over ownership of an investment bank, Bear Sterns.
Explanation / Answer
1) From 1933 until the financial crisis of 2008 there was a continuous trend toward stricter and more pervasive government regulation, especially in markets dealing with financial derivatives..FALSE
Explanation: The government regulations could have prevented or mitigated the credit crisis of 2008. If the government regulations were in place to the accumulation of subprime mortgages would have been less. The credit score setting, down payment and proof of income requirements that lenders need to adhere to could have prevented the credit crisis of 2008
2) The Troubled Asset Relief Program (TARP) initiated in 2008 was created by the Federal Reserve System so that it could directly purchase mortgage backed securities and other “troubled assets...TRUE
Explanation: The Troubled Asset Relief Program (TARP) was created by the Emergency Economic. Stabilization Act with a purpose to restore liquidity to the money markets
3) During the Financial Crisis of 2008 the Federal Reserve System directly took over ownership of an investment bank, Bear Sterns...TRUE
Explanation: During the Financial Crisis of 2008, Bear Stearns and Merrill Lynch, two investment banks in business for a century, collapsed; and for the rescue of investment bank Bear Stearns, the Federal Reserve accepted as collateral securities that was backed by subprime mortgages of unknown market value and risks