praj-17/QA-MCQ-Open-ended huggingface dataset:
Title: Financial_crisis_of_2007%E2%80%9308
Context: Bernanke explained that between 1996 and 2004, the U.S. current account deficit increased by $650 billion, from 1.5% to 5.8% of GDP. Financing these deficits required the country to borrow large sums from abroad, much of it from countries running trade surpluses. These were mainly the emerging economies in Asia and oil-exporting nations. The balance of payments identity requires that a country (such as the U.S.) running a current account deficit also have a capital account (investment) surplus of the same amount. Hence large and growing amounts of foreign funds (capital) flowed into the U.S. to finance its imports.

question: Per Bernanke, how much did the U.S. current account deficit increase between 1996 and 2004? 

answer: $650 billion

question: What percentage of GDP was the U.S. current account deficit in 2004? 

answer: 5.8%

question: What emerging economies did the U.S. borrow money from between 1996 and 2004 to finance its imports? 

answer: Asia and oil-exporting nations

question: What type account is needed by the U.S. to balance an account deficit? 

answer: capital account

question: Where did the U.S. obtain capital to finance its imports? 

answer: foreign funds
Title: Financial_crisis_of_2007%E2%80%9308
Context: The Fed then raised the Fed funds rate significantly between July 2004 and July 2006. This contributed to an increase in 1-year and 5-year adjustable-rate mortgage (ARM) rates, making ARM interest rate resets more expensive for homeowners. This may have also contributed to the deflating of the housing bubble, as asset prices generally move inversely to interest rates, and it became riskier to speculate in housing. U.S. housing and financial assets dramatically declined in value after the housing bubble burst.

question: When did the Fed begin raising Fed funds rate significantly? 

answer: July 2004

question: What does ARM stand for: 

answer: adjustable-rate mortgage

question: How do asset prices generally move in relation to interest rates? 

answer: inversely

question: Beginning in July 2004, what did the Fed do to make ARM rates more expensive for homeowners? 

answer: raised the Fed funds rate

question: How did U.S. housing and financial assets react to the housing bubble burst? 

answer: dramatically declined in value
Title: Financial_crisis_of_2007%E2%80%9308
Context: Testimony given to the Financial Crisis Inquiry Commission by Richard M. Bowen III on events during his tenure as the Business Chief Underwriter for Correspondent Lending in the Consumer Lending Group for Citigroup (where he was responsible for over 220 professional underwriters) suggests that by the final years of the U.S. housing bubble (2006–2007), the collapse of mortgage underwriting standards was endemic. His testimony stated that by 2006, 60% of mortgages purchased by Citi from some 1,600 mortgage companies were "defective" (were not underwritten to policy, or did not contain all policy-required documents) – this, despite the fact that each of these 1,600 originators was contractually responsible (certified via representations and warrantees) that its mortgage originations met Citi's standards. Moreover, during 2007, "defective mortgages (from mortgage originators contractually bound to perform underwriting to Citi's standards) increased... to over 80% of production".

question: Richard M. Bowen III testified to the Financial Crisis Inquiry Commission regarding his tenure at which financial institution? 

answer: Citigroup

question: How many underwriters was Richard M. Bowen III responsible for at Citigroup? 

answer: 220

question: What percent of mortgages purchased by Citigroup in 2006 were defective? 

answer: 60%

question: In 2006, how many mortgage companies were contractually responsible to meet Citi's standards? 

answer: 1,600

question: During 2007, what was the percent of defective mortgages not underwritten to Citi's standards? 

answer: over 80%
Title: Financial_crisis_of_2007%E2%80%9308
Context: In separate testimony to Financial Crisis Inquiry Commission, officers of Clayton Holdings—the largest residential loan due diligence and securitization surveillance company in the United States and Europe—testified that Clayton's review of over 900,000 mortgages issued from January 2006 to June 2007 revealed that scarcely 54% of the loans met their originators’ underwriting standards. The analysis (conducted on behalf of 23 investment and commercial banks, including 7 "too big to fail" banks) additionally showed that 28% of the sampled loans did not meet the minimal standards of any issuer. Clayton's analysis further showed that 39% of these loans (i.e. those not meeting any issuer's minimal underwriting standards) were subsequently securitized and sold to investors.

question: Who was the largest residential loan due diligence and securitization surveillance company? 

answer: Clayton Holdings

question: According to Clayton Holdings, how many mortgages issued from January 2006 to June 2007 met underwriting standards? 

answer: 54%

question: How many investment and commercial banks were included in Clayton Holdings' analysis of January 2006 to June 2007 loans?  

answer: 23

question: Per Clayton's analysis of loans issued from January 2006 to June 2007, what percent of loans did not meet minimal standards of any issuer? 

answer: 28%

question: How many mortgage loans did Clayton Holdings review in their analysis? 

answer: 900,000
Title: Financial_crisis_of_2007%E2%80%9308
Context: Predatory lending refers to the practice of unscrupulous lenders, enticing borrowers to enter into "unsafe" or "unsound" secured loans for inappropriate purposes. A classic bait-and-switch method was used by Countrywide Financial, advertising low interest rates for home refinancing. Such loans were written into extensively detailed contracts, and swapped for more expensive loan products on the day of closing. Whereas the advertisement might state that 1% or 1.5% interest would be charged, the consumer would be put into an adjustable rate mortgage (ARM) in which the interest charged would be greater than the amount of interest paid. This created negative amortization, which the credit consumer might not notice until long after the loan transaction had been consummated.

question: What is the name for lending that entices borrowers to enter into unsafe secured loans? 

answer: Predatory lending

question: What company used a classic bait-and-switch method by advertising low interest rates? 

answer: Countrywide Financial

question: Which type loan would the consumer be put into instead of the 1% or 1.5% interest rate loan as advertised? 

answer: adjustable rate mortgage (ARM)

question: What was created when the interest charged was greater than the amount of interest paid? 

answer: negative amortization

question: What type predatory lending method did Countrywide Financial use? 

answer: classic bait-and-switch
Title: Financial_crisis_of_2007%E2%80%9308
Context: Countrywide, sued by California Attorney General Jerry Brown for "unfair business practices" and "false advertising" was making high cost mortgages "to homeowners with weak credit, adjustable rate mortgages (ARMs) that allowed homeowners to make interest-only payments". When housing prices decreased, homeowners in ARMs then had little incentive to pay their monthly payments, since their home equity had disappeared. This caused Countrywide's financial condition to deteriorate, ultimately resulting in a decision by the Office of Thrift Supervision to seize the lender.

question: Who sued Countrywide for unfair business practices and false advertising? 

answer: California Attorney General Jerry Brown

question: What type mortgages allowed homeowners to make interest-only payments? 

answer: adjustable rate mortgages (ARMs)

question: What happened to home equity when housing prices decreased? 

answer: disappeared

question: Who made the decision to seize Countrywide after their financial condition deteriorated? 

answer: Office of Thrift Supervision

question: What type credit did borrowers obtaining mortgages from Countrywide have? 

answer: weak credit
Title: Financial_crisis_of_2007%E2%80%9308
Context: Critics such as economist Paul Krugman and U.S. Treasury Secretary Timothy Geithner have argued that the regulatory framework did not keep pace with financial innovation, such as the increasing importance of the shadow banking system, derivatives and off-balance sheet financing. A recent OECD study suggest that bank regulation based on the Basel accords encourage unconventional business practices and contributed to or even reinforced the financial crisis. In other cases, laws were changed or enforcement weakened in parts of the financial system. Key examples include:

question: What economist believed that regulations did not keep up with financial innovation? 

answer: Paul Krugman

question: Who was the U.S. Treasury Secretary dealing with the aftermath of the financial crisis of 2007? 

answer: Timothy Geithner

question: Which group's study suggested that Basel accords encourage unconventional business practices? 

answer: OECD

question: It has been argued that what did not keep up with financial innovation? 

answer: regulatory framework

question: What accords possibly contributed to or reinforced the financial crisis? 

answer: Basel
Title: Financial_crisis_of_2007%E2%80%9308
Context: Prior to the crisis, financial institutions became highly leveraged, increasing their appetite for risky investments and reducing their resilience in case of losses. Much of this leverage was achieved using complex financial instruments such as off-balance sheet securitization and derivatives, which made it difficult for creditors and regulators to monitor and try to reduce financial institution risk levels. These instruments also made it virtually impossible to reorganize financial institutions in bankruptcy, and contributed to the need for government bailouts.

question: What did financial institutions do prior to the crisis? 

answer: became highly leveraged

question: What type financial instruments are off-balance sheet securitization and derivatives? 

answer: complex

question: Who bailed out financial institutions? 

answer: government

question: Which option was nearly impossible for financial institutions to reorganize under? 

answer: bankruptcy

question: What are the type financial instruments that were difficult for creditors and regulators to monitor? 

answer: complex financial instruments
Title: Financial_crisis_of_2007%E2%80%9308
Context: From 2004 to 2007, the top five U.S. investment banks each significantly increased their financial leverage (see diagram), which increased their vulnerability to a financial shock. Changes in capital requirements, intended to keep U.S. banks competitive with their European counterparts, allowed lower risk weightings for AAA securities. The shift from first-loss tranches to AAA tranches was seen by regulators as a risk reduction that compensated the higher leverage. These five institutions reported over $4.1 trillion in debt for fiscal year 2007, about 30% of USA nominal GDP for 2007. Lehman Brothers went bankrupt and was liquidated, Bear Stearns and Merrill Lynch were sold at fire-sale prices, and Goldman Sachs and Morgan Stanley became commercial banks, subjecting themselves to more stringent regulation. With the exception of Lehman, these companies required or received government support. Lehman reported that it had been in talks with Bank of America and Barclays for the company's possible sale. However, both Barclays and Bank of America ultimately declined to purchase the entire company.

question: How many U.S. investment banks significantly increased their financial leverage from 2004 to 2007? 

answer: five

question: U.S. investment banks Increased their financial leverage and also increased their vulnerability to what? 

answer: financial shock

question: Changes in what intended to keep U.S. banks competitive with their European counterparts? 

answer: capital requirements

question: How much debt did the top five U.S. investment banks report in fiscal year 2007? 

answer: over $4.1 trillion

question: What financial institution went bankrupt and was liquidated in 2007? 

answer: Lehman Brothers
Title: Financial_crisis_of_2007%E2%80%9308
Context: Behavior that may be optimal for an individual (e.g., saving more during adverse economic conditions) can be detrimental if too many individuals pursue the same behavior, as ultimately one person's consumption is another person's income. Too many consumers attempting to save (or pay down debt) simultaneously is called the paradox of thrift and can cause or deepen a recession. Economist Hyman Minsky also described a "paradox of deleveraging" as financial institutions that have too much leverage (debt relative to equity) cannot all de-leverage simultaneously without significant declines in the value of their assets.

question: What is an example of something that can be detrimental if too many individuals pursue the same behavior? 

answer: saving more during adverse economic conditions

question: What is it called when too many consumers attempt to save or pay down debt at the same time? 

answer: paradox of thrift

question: What will happen if too many consumers save or pay down debt simultaneously? 

answer: can cause or deepen a recession

question: Who is the economist who described a "paradox of deleveraging"? 

answer: Hyman Minsky

question: Financial institutions cannot all de-leverage simultaneously without a decline in the value of this? 

answer: their assets
Title: Financial_crisis_of_2007%E2%80%9308
Context: During April 2009, U.S. Federal Reserve vice-chair Janet Yellen discussed these paradoxes: "Once this massive credit crunch hit, it didn’t take long before we were in a recession. The recession, in turn, deepened the credit crunch as demand and employment fell, and credit losses of financial institutions surged. Indeed, we have been in the grips of precisely this adverse feedback loop for more than a year. A process of balance sheet deleveraging has spread to nearly every corner of the economy. Consumers are pulling back on purchases, especially on durable goods, to build their savings. Businesses are cancelling planned investments and laying off workers to preserve cash. And, financial institutions are shrinking assets to bolster capital and improve their chances of weathering the current storm. Once again, Minsky understood this dynamic. He spoke of the paradox of deleveraging, in which precautions that may be smart for individuals and firms—and indeed essential to return the economy to a normal state—nevertheless magnify the distress of the economy as a whole."

question: Who was the U.S. Federal Reserve vice-chair in April 2009? 

answer: Janet Yellen

question: What happened soon after the massive credit crunch hit? 

answer: we were in a recession

question: What deepened the credit crunch when demand and employment fell? 

answer: recession

question: What was one of the actions businesses took to preserve cash? 

answer: cancelling planned investments

question: What occurred in nearly every corner of the economy after the financial crisis of 2007? 

answer: balance sheet deleveraging
Title: Financial_crisis_of_2007%E2%80%9308
Context: The term financial innovation refers to the ongoing development of financial products designed to achieve particular client objectives, such as offsetting a particular risk exposure (such as the default of a borrower) or to assist with obtaining financing. Examples pertinent to this crisis included: the adjustable-rate mortgage; the bundling of subprime mortgages into mortgage-backed securities (MBS) or collateralized debt obligations (CDO) for sale to investors, a type of securitization; and a form of credit insurance called credit default swaps (CDS). The usage of these products expanded dramatically in the years leading up to the crisis. These products vary in complexity and the ease with which they can be valued on the books of financial institutions.

question: What term refers to the ongoing development of financial products? 

answer: financial innovation

question: What is an example of financial innovation pertinent to the financial crisis? 

answer: adjustable-rate mortgage

question: What is the abbreviation for a form of credit insurance called credit default swaps? 

answer: CDS

question: What is the financial innovation that bundles subprime mortgages? 

answer: mortgage-backed securities (MBS)

question: What happened to the usage of financial innovation products in the years leading up the financial crisis? 

answer: expanded dramatically
Title: Financial_crisis_of_2007%E2%80%9308
Context: CDO issuance grew from an estimated $20 billion in Q1 2004 to its peak of over $180 billion by Q1 2007, then declined back under $20 billion by Q1 2008. Further, the credit quality of CDO's declined from 2000 to 2007, as the level of subprime and other non-prime mortgage debt increased from 5% to 36% of CDO assets. As described in the section on subprime lending, the CDS and portfolio of CDS called synthetic CDO enabled a theoretically infinite amount to be wagered on the finite value of housing loans outstanding, provided that buyers and sellers of the derivatives could be found. For example, buying a CDS to insure a CDO ended up giving the seller the same risk as if they owned the CDO, when those CDO's became worthless.

question: When did the issuance of CDO peak? 

answer: Q1 2007

question: What was the estimated value of CDO issuance in Q1 2004? 

answer: $20 billion

question: What was the estimated value of CDO issuance at it's peak in Q1 2007? 

answer: over $180 billion

question: What percent of CDO assets were subprime and other non-prime mortgage debt in 2007? 

answer: 36%

question: What was the estimated value of CDO issuance in Q1 2008? 

answer: under $20 billion
Title: Financial_crisis_of_2007%E2%80%9308
Context: This boom in innovative financial products went hand in hand with more complexity. It multiplied the number of actors connected to a single mortgage (including mortgage brokers, specialized originators, the securitizers and their due diligence firms, managing agents and trading desks, and finally investors, insurances and providers of repo funding). With increasing distance from the underlying asset these actors relied more and more on indirect information (including FICO scores on creditworthiness, appraisals and due diligence checks by third party organizations, and most importantly the computer models of rating agencies and risk management desks). Instead of spreading risk this provided the ground for fraudulent acts, misjudgments and finally market collapse. In 2005 a group of computer scientists built a computational model for the mechanism of biased ratings produced by rating agencies, which turned out to be adequate to what actually happened in 2006–2008.[citation needed]

question: Which products created more complexity in the financial markets? 

answer: innovative financial products

question: What effect did the introduction of innovative financial products have on a single mortgage? 

answer: multiplied the number of actors connected

question: What did institutions rely more on as increasing distance from underlying assets occurred? 

answer: indirect information

question: What is a type of indirect information that financial institutions and investors used to judge the risk? 

answer: computer models of rating agencies

question: In what year did a group of computer scientists build a model for ratings produced by rating agencies that turned out to be accurate for what happened in 2006-2008? 

answer: 2005
Title: Financial_crisis_of_2007%E2%80%9308
Context: The pricing of risk refers to the incremental compensation required by investors for taking on additional risk, which may be measured by interest rates or fees. Several scholars have argued that a lack of transparency about banks' risk exposures prevented markets from correctly pricing risk before the crisis, enabled the mortgage market to grow larger than it otherwise would have, and made the financial crisis far more disruptive than it would have been if risk levels had been disclosed in a straightforward, readily understandable format.

question: What is a measurement of pricing of risk? 

answer: interest rates or fees

question: What is the incremental compensation required by investors for taking on addition risk called? 

answer: pricing of risk

question: According to several scholars, what prevented markets from correctly pricing risk before the crisis? 

answer: lack of transparency about banks' risk exposures

question: How should risk levels have been disclosed according to several scholars? 

answer: straightforward, readily understandable format

question: What was the outcome of the financial crisis since risk levels were not adequately disclosed? 

answer: far more disruptive
Title: Financial_crisis_of_2007%E2%80%9308
Context: For a variety of reasons, market participants did not accurately measure the risk inherent with financial innovation such as MBS and CDOs or understand its impact on the overall stability of the financial system. For example, the pricing model for CDOs clearly did not reflect the level of risk they introduced into the system. Banks estimated that $450bn of CDO were sold between "late 2005 to the middle of 2007"; among the $102bn of those that had been liquidated, JPMorgan estimated that the average recovery rate for "high quality" CDOs was approximately 32 cents on the dollar, while the recovery rate for mezzanine CDO was approximately five cents for every dollar.

question: What did market participants fail to measure accurately? 

answer: risk inherent with financial innovation

question: What are the reasons market participants did not understand the impact financial innovation products would have? 

answer: a variety of reasons

question: How much did JPMorgan estimate was the average recovery rate for high quality CDOs that had been liquidated? 

answer: approximately 32 cents on the dollar

question: How much did JPMorgan estimate was the average recovery rate for mezzanine CDOs that had been liquidated? 

answer: approximately five cents for every dollar

question: How much did banks estimate was the value of CDOs sold between late 2005 to the middle of 2007? 

answer: $450bn
Title: Financial_crisis_of_2007%E2%80%9308
Context: Another example relates to AIG, which insured obligations of various financial institutions through the usage of credit default swaps. The basic CDS transaction involved AIG receiving a premium in exchange for a promise to pay money to party A in the event party B defaulted. However, AIG did not have the financial strength to support its many CDS commitments as the crisis progressed and was taken over by the government in September 2008. U.S. taxpayers provided over $180 billion in government support to AIG during 2008 and early 2009, through which the money flowed to various counterparties to CDS transactions, including many large global financial institutions.

question: What firm insured obligations of various financial institutions using credit default swaps? 

answer: AIG

question: What does the abbreviation CDS stand for? 

answer: credit default swaps

question: When did the government take over AIG? 

answer: September 2008

question: How much money did taxpayers provide in government support to AIG during 2008 and early 2009? 

answer: over $180 billion

question: What did AIG receive for promising to pay Party A in the event that Party B defaulted? 

answer: a premium