Banks are critical to the U.S. economy because their primary function is to:
The primary function of banks is to put their account holders' money to use by lending it out to others to do things such as buy homes, start businesses and send kids to college. Banks create money in the economy by making loans.
In response to the banking crisis during the Great Depression, the United States government:
The U.S. Federal Government established the Federal Deposit Insurance Corporation (FDIC) to back deposits in case the bank failed.
How do banks make money?
Banks make money with fees they charge for services and from the interest they charge on loans. The interest they charge is higher than the interest they pay on depositors' accounts.
Who is primarily responsible for protecting the public from unsafe banking practices?
The agency that charters the bank is primarily responsible for protecting the public from unsafe banking practices. It conducts on-site examinations to make sure the bank's financial condition is good and that the bank is complying with banking laws.
In deciding whether to issue a charter to a bank, an agency will asses the directors' and CEOs':
The credit histories and relevant business histories of the bank's directors and CEOs will greatly affect the acceptance or denial of the bank's charter.
Bank organizers are responsible for contributing what percentage of the capital requirements to start a bank?
Bank organizers are typically responsible for 10 percent to 15 percent of start-up capital of a bank. The remainder is sold to shareholders.
The Federal Reserve Act requires banks to:
The Federal Reserve Act requires banks to keep a certain percentage of their money in reserve. Despite this, if everyone came to withdraw their money from the bank at the same time, there wouldn't be enough.
Which of the following types of accounts is a kind of checking account that pays interest?
A NOW (negotiable order of withdrawal) account is like a checking account that pays interest. Money market accounts and certificates of deposit have more limitations on when you can withdraw money.
What is a holding company?
A bank holding company is a company that holds a significant amount of stock in a bank and has a certain amount of control over the bank.
The FDIC typically insures depositors for up to:
Depositors are typically protected for up to $250,000 in FDIC-insured banks. The amount was increased fro $100,000 in 2008.
Banks have come under scrutiny with the tumultuous economy -- they do much more than just hold on to your money for you. Take the quiz and see if you know how banks really work.
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