The Primary Difference Between the "Payoff" and the "Purchase and Assumption

question 88

Multiple Choice

The primary difference between the "payoff" and the "purchase and assumption" methods of handling failed banks is

• A)that the FDIC guarantees all deposits when it uses the "payoff" method.
• B)that the FDIC guarantees all deposits when it uses the "purchase and assumption" method.
• C)that the FDIC is more likely to use the "payoff" method when the bank is large and it fears that depositor losses may spur business bankruptcies and other bank failures.
• D)that the FDIC is more likely to use the purchase and assumption method for small institutions because it will be easier to find a purchaser for them compared to large institutions.

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Definitions:

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