Regulatory Issues
ASSIGNMENT
Module: Regulatory issues in banking and finance
The biggest chunk that about 25% of the $8.5trln overall is held by foreign governments. China tops the list with $1155 billion, followed by Japan $885 billion, United Kingdom $278 billion and oil exporting countries $255 billion. Other big holders of Treasury debt involve local and state governments, individual investors which are brokers, mutual funds, public and private pension funds, holders of US savings bonds, banks and credit unions and insurance companies. (http://www.economicshelp.org)
Answer 2
The increased foreign ownership of government debt is dangerous for every country even for the USA. The USA is the biggest creditor in the world but at the same time this country is the biggest borrower. But, as long as the national debt of the USA is denominated in dollars, it is okay. The point is that there is a risk that is the following: if foreign investors fear that the dollar will fall against their currency they could require a higher interest rates as damages, or they could insist that the Treasury issue bonds denominated in foreign currencies. This wouldn’t be good, because it would move all the foreign exchange risk to the taxpayer. While the U.S. Treasury has never issued bonds denominated in foreign currencies, it is possible that it could be forced to do so if the dollar falls stridently and foreign demand for U.S. bonds declines. That will be the point at which their debt problem becomes more than theoretical and they are really on the road to national bankruptcy.
Answer 3
Junk bond, a high-yield bond, is a bond that is rated below investment ranking at the purchase time. These bonds contain a higher risk of default or other unfavorable credit events, but usually pay higher yields than better excellence bonds in order to make them attractive to investors. If someone desires high risk with high return, junk bonds might be the investment for
Module: Regulatory issues in banking and finance
The biggest chunk that about 25% of the $8.5trln overall is held by foreign governments. China tops the list with $1155 billion, followed by Japan $885 billion, United Kingdom $278 billion and oil exporting countries $255 billion. Other big holders of Treasury debt involve local and state governments, individual investors which are brokers, mutual funds, public and private pension funds, holders of US savings bonds, banks and credit unions and insurance companies. (http://www.economicshelp.org)
Answer 2
The increased foreign ownership of government debt is dangerous for every country even for the USA. The USA is the biggest creditor in the world but at the same time this country is the biggest borrower. But, as long as the national debt of the USA is denominated in dollars, it is okay. The point is that there is a risk that is the following: if foreign investors fear that the dollar will fall against their currency they could require a higher interest rates as damages, or they could insist that the Treasury issue bonds denominated in foreign currencies. This wouldn’t be good, because it would move all the foreign exchange risk to the taxpayer. While the U.S. Treasury has never issued bonds denominated in foreign currencies, it is possible that it could be forced to do so if the dollar falls stridently and foreign demand for U.S. bonds declines. That will be the point at which their debt problem becomes more than theoretical and they are really on the road to national bankruptcy.
Answer 3
Junk bond, a high-yield bond, is a bond that is rated below investment ranking at the purchase time. These bonds contain a higher risk of default or other unfavorable credit events, but usually pay higher yields than better excellence bonds in order to make them attractive to investors. If someone desires high risk with high return, junk bonds might be the investment for
References: 1. S.Scott MacDonald, Timothy W.Koch; ‘’Management of Banking’’, 6th International edition,2008 2. Johnson, Hazel J. ``Global Financial Institutions and Markets``, Blackwell Publishers Inc. 2000 3. Sh. Heffernan, ``Modern Banking``, John Wiley & Sons, Ltd 2005 4. Peter S. Rose, Sylvia C. Hudgins, ``Bank Management & Financial Services``, 8th McGraw-Hill International edition 5. http://www.mortgage-leads-generator.com/ 6. http://remnantculture.com/ 7. http://www.progressivelibertarian.com 8. www.almprofessional.com 9. www.allbusiness.com 10. http://business.highbeam.com