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Bank RegulationsBanking & FinanceBellringerComplete the Chapter 6 online pretestwww.m.g-wlearning.comSection 6.1 ObjectivesExplain the conditions that existed in the banking industry during the 1920s and 1930sDescribe the provisions of the Glass-Steagall ActExplain why the legislation that created FIRREA and FDICIA was needed.Describe how the Sarbanes-Oxley Act increases transparency and accountability in banking.Setting the Stage for FailureThe Great Depression9,000 banks closed4,000 failed in 1933Causes of Bank FailuresDuring the 1920s and 1930sCauseEffectCrop failures during the 1920sSmall banks in farming areas were affected as farms were foreclosed.ContagionLack of faith in the soundness of banks spreads like the common cold.BranchingState banks were largely prohibited from opening branches in other locations.National banks opened branches that provided stiff competition to unit banks.Number of BanksThe number of banks increased more than the populations need for banks did.Reduced travel costsBecause it was too difficult or too expensive to travel far, people banked locally.Cars and train travel became less expensive, which allowed people to travel outside of their town to do their banking.Stock market crashBanks had invested in the stock market and lost much of their assets during the crash.Consequences of theStock Market CrashBanks and investment banking operations that owned securities lost most of their investment.Unemployment was quite high.Customers defaulted on loansBanks paid higher interest rates to attract depositors.Loans became unprofitable.

Bank RunOccurs when a large number of depositors withdraw all of their money from the bank at the same time.Deposits were not insured at the beginning of the Great Depression.CheckpointList four factors that lead to the many bank failures during the Great Depression.Glass-SteagallVideo: U.S. History ProjectGlass SteagallGo to http://www.autoenglish.org/listening/crisisReading.htmCheckpointWhat were two goals of the Glass-Steagall Act?How did the Glass-Steagall Act affect interest rates?Relaxing Depression-Era Regulation . . .You Research. You Learn. You Summarize.Federal Home Loan Bank BoardFinancial Institution Reform, Recovery, and Enforcement Act (FIRREA)Federal Depository Insurance Corporation Improvement Act (FDICIA)CheckpointName two federal agencies that were eliminated under the FIRREA.Sarbanes-Oxley ActVideo: Sarbanes-Oxley ActCheckpointWhat is the major purpose of the Sarbanes-Oxley Act?3-2-1 Review: Prepare to ShareBellringerShort Research Assignment: Google Equator PrinciplesA student will be randomly selected to provide a detailed explanation of the concept.The entire class will receive 4 dots if correct. If unprepared, the entire class will lose 4 dots.Section 6.2 ObjectivesDescribe the regulations that govern consumer credit.Explain the need for regulations that focus on fair access to credit.ACT RIGHT!Protecting BorrowersTruth in Lending ActFair Credit Reporting ActFair Credit Billing ActCredit CARD ActPromoting and Ensuring Fair Access to CreditCommunity Reinvestment Act (CRA)Home Mortgage Disclosure Act (HDMA)Equal Credit Opportunity Act (ECOA)

Group ActivityYou will be split into 2 groups:Protecting BorrowersPromoting and Ensuring Fair Access to CreditCreate a rap song thoroughly explaining your assigned topicProvide written (or typed) lyricsProvide the instrumental musicBe prepared to be recorded.RubricSection 6.2 QuizWhat are the two most important disclosures that are required under the Truth in Lending Act?What is the purpose of the Fair Credit Reporting Act?According to the Fair Credit Billing Act, how long does a consumer have to dispute an error on his or her account statement?Which law requires that credit card issuers state the monthly payment amount necessary to pay off a cardholders existing balance in 36 months?Under the Equal Credit Opportunity Act, lenders may not discriminate against potential borrowers based on what factors?

BellringerAPR = Total interest paidX 360 daysLoan amountLength of loan in days

Bank A will loan you the $1,000 for six months (180 days), and you must repay the $1,000 plus $50 interest at the end of the six months.

APR = $50/1,000 X 360/180 = .05 X 2 = .10 = 10%Section 6.3 ObjectivesCompare and contrast deregulation laws.Explain the importance of compliance in the banking industry.Deregulation(Prepare for Dictation)Depository Institutions Deregulation and Monetary Control Act (DIDMCA)Garn-St. Germain ActInterstate Banking and Branching Efficiency ActGramm-Leach-Biley ActCheckpointWhy did a movement to deregulate banks start in the 1980s?How much was federal deposit insurance under DIDMCA?What is the difference between money market deposit accounts (MMDAs) and money market mutual funds (MMMFs)?Which law did the Interstate Banking Act override?ComplianceDual banking system (both states and federal government pass and enforce bank lawsFunctional areas include:Advertising;Anti-money laundering;The Bank Secrecy Act;Depository operations;Lending;Loan servicing; andLoss prevention

CompliancePlan for compliance must be strong.Plan should:Identify areas of high riskEstablish internal controlsProvide for an audit by outside source on ongoing basisAssign someone in organization to manage all compliance matters (compliance officer)Provide training to all staff working in areas where compliance is an issueSet up system to verify bank customer identity

CheckpointWhat are the functional areas of bank compliance?Individual ActivityDecide if you are in favor of bank deregulation or not.Outline 3 main reasons for your position.Defend your position in 3.5 essay format.Rubric

Unit 2 Summative AssessmentGet Ready!Handout will be provided!!!null249799.42