1) (Please answer this question according to THE BIG SHORT MOVIE . )

There wasn’t a corrupt relationship among which pair of parties before the financial crisis?

Select one:

a. Banks and banks.

b. Banks and mortgage brokers.

c. Banks and credit rating agencies.

d. None of the above.

2) (Please answer this question according to THE BIG SHORT MOVIE . )

Bank bailouts do not create any incentives for bank managers to take excessive risks that may lead to financial distress.

Select one:

True

False

Answer 1) 

A. banks and banks.

In 2008 crisis bank collated with mortgage brokers and credit rating agencies. In passing the sub prime mortgages and fraudulent credit rating to the sub par instruments. However there were no instance of banks collating with each other in the crisis.

Answer 2) False

Bank bailouts refers to assistance and aid provided by the government to banks in order to protect the interests of the stakeholders of the bank. If there are regular bailouts the managers are tempted to take excessively risks because they know that the bank will be bailed out if it faces bankruptcy. Hence Bank bailouts do increase the risk taking behaviour of bank managers.