Due to Banking Regulations, Banks in the Early Part of the Twentieth

question 56

Multiple Choice

Due to banking regulations, banks in the early part of the twentieth century were not allowed to nationalize and thus many banks had most of their investments tied up in the agricultural sector. The Dust Bowl and retaliatory tariffs caused many banks to fail, particularly during the Great Depression. Ignoring legal and cultural restrictions, what piece of advice would have served banks very well during this time?

• A) employing compound returns
• B) diversification
• C) having more low-risk investments
• D) reducing the fees the banks charged on checking accounts

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Definitions:

Contingent Fees

A fee arrangement where payment to a professional, especially a lawyer, depends on the successful resolution of a case, often a percentage of the settlement or judgment.

Ethical Issue

A problem or situation that requires a person or organization to choose between alternatives that must be evaluated as right (ethical) or wrong (unethical) based on moral principles.

Professional Ethics

Encompasses the personal, organizational, and corporate standards of behavior expected of professionals.

Paternalistic View

A perspective that endorses restricting the freedom of individuals for their own good, often without their consent.