NRE 3245 Lecture 3: 3 Laws v Regulations Part 2

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carminetermite400

26 Jan 2019

School

UConn

Department

Natural Resources and the Environment

Course

NRE 3245

Professor

Professor HARRISON

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Document Summary

Public laws: how they are created and implemented. (step by step: constitution does not decide where the idea for a law comes from, so anyone can write a bill proposal, then, get a congress person on it. Each congress member has their own personal staff: draft goes to head of appropriate committee and they are given a number, will hold a public hearing on the bill. No requirement to hold meeting, but it is customary: after they discuss the bill, they will add or remove sections, then it gets voted on in the committee, and possible repeat step 5. When they decide its ready, they send it to the house. The house has to pass majority on the bill: when it has passed, it is now sent to the senate, where they assign a committee, give the bill a number, goes through whole process over again.

Related Questions

Required: After reading the Bye, Bye SOX? Article comment on the issue of small business compliance with Section 404 of SOX

Bye, Bye, SOX?
The Sarbanes-Oxley Act (SOX)	SOX compliance has been extended
may be declawed by upcoming	four times, but they wonât need to
U.S. Congress and	comply at all if the Garrett-Adler
Supreme Court decisions.	amendment makes it to the Senate
The House of Representatives	floor as a standalone bill.
recently voted to approve the	SOX also established the
Garrett-Adler amendment, which	PCAOB to oversee and regulate
would exempt small companies	audit firms. PCAOB operates under
from SOX Section 404 provisions,	the supervision of the Securities
while the Supreme Court is considering	and Exchange Commission (SEC),
the constitutionality of the	which also appoints PCAOB members.
Public Company Accounting Oversight	It is funded by fees charged to
Board (PCAOB).	audited firms. When it was established,
These developments may have	Congress wanted the board
long-term implications for SOX, the	to be separate, with its own funding
2002 legislation passed in the wake	stream, and outside normal civil
of the Enron, WorldCom, and Tyco	service laws so it could attract
scandals. The outcomes may also	highly qualified specialists. PCAOB
have implications for records managers,	membersâ salaries are more than
information technology specialists,	$500,000 and are reviewed by the
and compliance officers	SEC.
who devise and implement company	Pro-business advocates, represented
controls.	by the Free Enterprise
Section 404 of SOX requires	Fund, argue that the PCAOBâs governance
company auditors to attest to the	structure is unconstitutional
soundness of the firmâs internal	because it is an independent
controls and financial statements.	agency that does not allow for the
Internal controls may include anything	president to appoint members. Additionally,
from transaction approval authorizations	because only the president
to records retention	can remove SEC commissioners
programs. This provision is widely	for cause, and because
blamed for an increase in auditorsâ	the SEC can only remove PCAOB
fees, as well as increased expenditures	members for cause, some court
to ensure that proper internal	members believe this is a formerly
controls are in place.	unrecognized limit of the presidentâs
Small firms â those with	powers that may contradict
less than $75 million in	the constitution.
market capitalization	The Supreme Court will take up
â have protested that	the issue soon, and some legal experts
compliance with SOX 404 would	believe that SOX could be
cost them a disproportionate share	abolished completely if the court
of their earnings. The complaint is	rules the PCAOB unconstitutional.
supported by an independent study
conducted at Pennsylvania State
University, which showed that
firms just over the $75 million
mark paid nearly $700,000 more in
audit fees and had average earnings
of negative $1.4 million in 2004

aquamarinebear162

QUESTION 31

The Board of Governors of the Federal Reserve System is

		composed of seven members who are appointed by the President and approved by the Senate.
		composed of 12 members of the Senate and the U.S. House of Representatives.
		elected by the general public.
		composed of representatives from the country's 12 largest commercial banks.

1.11 points

QUESTION 32

The Fed is said to be the "lender of last resort" in that

		it charges a higher interest rate to borrowers than does any other bank.
		it functions as the government's bank only when commercial banks fail to do so.
		it makes loans to individuals whom commercial banks do not believe are credit-worthy.
		it stands ready to lend to any depository institution that it has decided should not fail.

1.11 points

QUESTION 33

The Federal Reserve System acts as the government's fiscal agent by

		providing checking account services for the government.
		preparing the budget the President presents to Congress every year.
		determining how to finance a deficit.
		auditing taxpayers.

1.11 points

QUESTION 34

The Federal Reserve System was established in which year?

		1913.
		1929.
		1865.
		1941.

1.11 points

QUESTION 35

By serving as the lender of last resort,

		the Fed provides check clearing services.
		the Fed aids in the sale of government securities.
		the Fed supervises depository institutions.
		the Fed can prevent bank failures.

1.11 points

QUESTION 36

Depository institutions must

		use and pay for the services of the Federal Reserve System.
		set their interest rates according to schedules established by the Federal Reserve System.
		keep a certain percentage of their deposits as reserves.
		turn over a percentage of their profits to the Federal Reserve System as payment for services provided by the Fed.

1.11 points

QUESTION 37

The Federal Reserve System has

		50 district banks.
		24 district banks.
		12 district banks.
		7 district banks.

1.11 points

QUESTION 38

The part of the Federal Reserve System (the Fed) that holds the reserve balances of depository institutions is

		the Board of Governors.
		the Federal Advisory Committee.
		the Federal Open Market Committee.
		the Federal Reserve district banks.

1.11 points

QUESTION 39

The potential for a financial breakdown at one financial institution to spread throughout the financial system is known as a

		systemic risk.
		liquidity risk.
		lending risk.
		moral hazard.

1.11 points

QUESTION 40

A system in which depository institutions hold reserves that are less than the amount of total deposits is called

		fiat money banking.
		required reserve banking.
		fractional reserve banking.
		central banking system.

1.11 points

QUESTION 41

Total reserves of private banks are

		all customer deposits.
		the minimum amount banks need to hold against time deposits.
		federal reserve notes.
		deposits held at the Fed and vault cash.

1.11 points

QUESTION 42

A statement of assets and liabilities of any business entity is called

		a cash flow statement.
		an income statement.
		a balance sheet.
		a statement of net worth.

1.11 points

QUESTION 43

Which of the following actions has no effect on the total money supply?

		The Federal Open Market Committee buys government securities.
		There is a transfer of deposits from one bank to another bank.
		There is change in the money multiplier.
		The Federal Open Market Committee sells government securities.

1.11 points

QUESTION 44

Given a required reserve ratio of 20 percent, a commercial bank that has received a new deposit of $100 can make additional loans of

		$80.
		$0.
		$400.
		$20.

1.11 points

QUESTION 45

The Federal Open Market Committee has responsibility for

		appointing members to the Board of Governors of the Federal Reserve system.
		issuing orders to buy or sell government securities for the Fed.
		advising the Treasury Department on monetary policy.
		printing money.

indigobutterfly708

1. Which of the following are reasons that banks are so heavily regulated?
a. Governments are concerned about the safety of deposits.
b. The industry is a principal determinant of aggregate demand. c. Bank failures are contagious.
d. All of the above are correct.
2. Bankers' business decisions can affect the money supply because bankers
a. are respected men and women.
b. have the ability to create money.
c. use a special accounting system developed by the Federal Reserve Board.
d. All of the above are correct.
3. Bank failures in the U.S.
a. occurred frequently through the 1960s and declined since then.
b. occurred infrequently through the 1960s and have become more common since then.
c. occurred frequently through the 1930s, declined after that time, and became more common
in 2008.
d. occurred infrequently through the 1930s, increased after that time, and became less
common in 2008.
4. Money is an imperfect store of value when
a. the rate of inflation is high.
b. the unemployment rate is high.
5. Fiat money is
a. always backed by gold or silver. b. useful in buying Italian cars.
6. Which of the following assets is most liquid? a. short-term government bonds
b. savings accounts
c. gold prices are falling.
d. businesses are failing due to bankruptcy.
c. only backed by government decree. d. not as liquid as precious metals.
c. checking accounts d. currency and coins
7. The official definition of the money supply that includes coins, paper money, travelers' checks, conventional checking accounts, and other checkable deposits at banks and savings institutions is called ____.
a. M1 c. M3
b. M2 d. L
8. One difference between the assets included in M1 and those added to calculate M2 is that items in M1 are
a. better stores of value than those added to compute M2.
b. more liquid than those added to compute M2.
c. less liquid than those added to compute M2.
d. larger than those added to compute M2.
9. Bank regulation exists because public authorities are convinced that
a. the balance between public interest and safety does not affect profitability, and should be
removed from the hands of managers.
b. the balance between bank profitability and public interest cannot be handled with
legislation, but can be handled with regulation.
c. the balance between bank profitability and safety cannot be left to profit-maximizing
managers.
d. the balance between bank safety and public interest can best be obtained by reliance on the
market.
10. Banks try to keep their level of excess reserves low because
a. b. c. d.
the Fed charges a penalty for holdings of excess reserves.
they are concerned that the money multiplier will become too large. they wish to maximize profits.
bank regulators levy fines on the amount of excess reserves.
11. If the
a. 10. c. 4. b. 5. d. 2.
required reserve ratio, m, is 20 percent, then the oversimplified money multiplier is
12. If the
the maximum amount by which the money supply can be increased?
banking system has $5 million in excess reserves, and the required reserve ratio is 25 percent, what is
a. $25 million
b. $20 million
13. Barter transactions involve a double coincidence of wants. a. True
c. $5 million d. $2.5 million
b. False
14. The only major disadvantage of paper money is that it is hard to divide into smaller denominations.
a. True
Chapter 13
15. The principal objective of the Federal Reserve System is to
a. circulate coins and paper Federal Reserve Notes.
b. subsidize the income of member banks.
c. help stabilize the economy through monetary policy.
d. make profits to remit to the Treasury Department.
b. False
16. In practice, money supply and short-term interest rates are determined by the
a. b.
17. If the a. b. c. d.
Treasury and Commerce departments. c. Board of Governors. Federal Open Market Committee. d. House and Senate.
Fed buys a T-bill from a commercial bank, how will it pay for the T-bill? It will give the bank new reserves.
It will write the bank a check.
It will transfer cash to the bank's vault.
It will take reserves from another bank.
18. If the Federal Open Market Committee decides to expand the money supply, then it will
a. raise the discount rate to member banks.
b. issue directions to purchase government securities, thus putting more reserves in member
banks.
c. issue directions to sell government securities, thus taking reserves from member banks. d. order new Federal Reserve notes delivered to member banks.
19. As a knowledgeable investor in 2007, you should have realized that as interest rates fell, bond prices would
a. also fall. c. become more volatile, like stock prices.
b. rise. d. fall but not by as much as stock prices.
20. The concept of "lender of last resort" is that when
a. lending decreases, the Fed will be the last to resort to higher interest rates.
b. borrowing increases, the Fed will be the last to increase lending.
c. commercial banks are hesitant to lend, the Fed will step in and increase reserves. d. a borrower has tried everyone else, the Fed will lend directly to them.
21. If the Fed raises the reserve requirement on deposits from 15 percent to 20 percent, what would happen to the money supply?
a. It would decrease. c. It would remain unchanged.
b. It would increase. d. It depends on the value of interest rates.
22. Which of the following is most sensitive to monetary policy?
a. Governmentexpenditure b. Consumption spending
23. The main purpose of expansionary monetary policy is to a. expandTreasuryborrowing.
b. increase reserve requirements.
c. Utilityspending
d. Investment spending
c. insure deposits.
d. reduce interest rates.
24. The Fed is institutionally independent. A major advantage of this is that monetary policy
a. b. c. d.
25. Open a. b.
is subject to regular congressional scrutiny. will often offset fiscal policy.
is not controlled by politicians.
is usually coordinated with fiscal policy.
market operations generally involve the purchase and sales of governmentsecurities. c. coinsandcurrency. stocks and bonds. d. Federal Reserve notes.
26. Banks will hold additional excess reserves when
a. loans to customers look safe and interest rates are high.
b. they anticipate a bank audit.
c. loans to customers look risky and interest rates are low.
d. the economy is booming and there is a large demand for loans.
27. The United States is the only industrialized country without a central bank. a. False b. True
28. Unconventional monetary policies include massive lending to banks and open-market purchases of assets other than Treasury bills.
a. True b. False
Chapter 14
29. Which of the following was not a typical characteristic of subprime mortgages in 2003-2006?
a. low or zero down payments
b. loans to borrowers with poor credit histories
c. Lenders may not verify the stated income of the borrowers
d. Home interest rate was a record high
30. The intended use of TARP funds was to
a. support the FDIC. c. fund "shovel-ready" projects. b. increase consumers' disposable income. d. purchase unwanted securities.
31. What amount of money was appropriated by Congress for the Troubled Asset Relief Program? a. Around $20 billion c. Around $700 billion
b. Around $252 billion d. Around $1 billion
32. Based on the documentary,

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NRE 3245 Lecture 3: 3 Laws v Regulations Part 2

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