Question

1) The history of the banking system and financial innovation has shaped the development of the U.S. banking system. The following questions consider the structure of U.S. banking and the general trends in the financial system.

True or False: The U.S. banking system includes a large number of small- to medium-sized banks that account for a small share of total assets in the banking system.

2) The U.S. banking system experienced the Savings and Loan crisis in the 1980s, where key savings and loan associations (S&Ls) collapsed. Those S&Ls were tied to politicians with close relationships to S&L managers. The following questions examine this crisis.

True or False: Regulatory forbearance reduced the principal-agent problem associated with the S&L crisis in the 1980s.

Answer 1

Question 1

The number of very large banks in United States is very small relative to the number of such banks in other advanced economies.

However, even though, very large banks are fewer in United States but they control considerable portion of total assets in the banking system.

For instance, three very large banks in United States - Citibank, JP Morgan Chase, and Bank of America accounts for around 60 percent of total assets in banking system.

So, it is true that the US banking system includes a large number of small-to-medium-sized banks but such banks accounts for a small share of the total assets in the banking system.

Hence, the given statement is True.