M/C Borrower Beware QUIZ

Which of the following was NOT part of the financial crisis of 2008?

• Higher unemployment

• Collapse in stock market prices

• Sharp rise in consumer prices (inflation)

• People lost their homes

According to Mr. Allison, how do banks help the economy the most?

• By providing jobs for people

• By connecting those who have money with those who want to borrow money

• By charging interest rates for loans

• By paying interest on savings deposits

What does Mr. Allison believe is the most important factor in deciding whether a bank should give a loan?

• The size of the loan

• The income of the borrower

• The purpose of the loan—what it will be used for

• The character of the borrower

What are “Freddie Mac” and “Fannie Mae?"

• Government-created lending institutions

• Private investment firms

• Government agencies that oversee banks

• Famous individuals who started banks

What percentage of loans did President Clinton demand to be put in “affordable housing?"

• 25%

• 50%

• 75%

• 100%

What did Mr. Allison use as another term for “affordable housing?"

• fair housing

• slums

• properly priced homes

• subprime loans

According to Mr. Allison, what made a necessary correction into a crisis?

• bad loans

• over investment in housing

• arbitrary government intervention

• the Federal Reserve

What was the relationship between the housing market and the financial crisis?

• When people lost their jobs, they could no longer afford houses.

• When the government stopped subsidizing housing, prices collapsed.

• Too many bad loans led to a speculative bubble that ultimately led to a collapse in housing prices.

• The financial crisis was caused by the high price of houses.

Why would banks typically avoid the subprime loan business?

• Risky loans are less likely to be repaid.

• Banks don’t want to charge an unfair interest rate.

• Banks don’t want to deal with poor people.

• Banks only loan money to people the government tells them to.

What was the clearest purpose of the TARP program?

• To restore confidence in the US financial system

• To put homeless people into temporary shelters

• To restart the economy by closing bad banks

• To rescue failing financial institutions