economics money and banking question?
Oct 10, 2009
in
Commercial Property Loans
In order to reduce risk and increase the safety of financial institutions, commercial banks and other financial institutions are prohibited from:
A. owning municipal bonds.
B. making personal loans.
C. owning common stock.
D. making real estate loans.
I think the answer is B am I right?
Like this post? Subscribe to my RSS feed and get loads more!
One comment
simplicitus on October 10, 2009 at 9:36 am
1. Which country are you asking about? Each country has its own banking rules and regulations
2. If you are asking about the U.S., then you are clearly wrong. Where do you get your car loan, your mortgage, your credit card if not from a financial institution?
3. There are restrictions on what different sorts of financial institutions can do, but they have been changing.
In the U.S., the Gramm-Leach-Bliley Act of 1999
http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act
repealed many of the restriction of the Glass-Steagal Act
http://en.wikipedia.org/wiki/Glass-Steagall_Act
(which was the one of the primary causes of the current recession) but it did not repeal the Bank Holding Company Act of 1956 in its entirety.
http://en.wikipedia.org/wiki/Bank_Holding_Company_Act_of_1956
So there is still some sort of distinction between banks and non-bank financial institutions.
4. But since you lump "commercial banks and other financial institutions" together, the answer is "none of the above". For each of your 4 options, there is at least one sort of financial institution that is allowed to do it.