Of the Following Methods That Banks Might Use to Reduce

question 16

Multiple Choice

Of the following methods that banks might use to reduce moral hazard problems,the one not legally permitted in the United States is the requirement that

• A) firms keep compensating balances at the banks from which they obtain their loans.
• B) firms place on their board of directors an officer from the bank.
• C) loan contracts include restrictive covenants.
• D) individuals provide detailed credit histories to bank loan officers.