3 Семестр additional material banks and financial intermediaries

Banks are financial institutions that accept money deposits and make loans. Included under the term “banks” are firms such as commercial banks, savings and loan associations, mutual savings banks, and credit unions.

Banks are important for three reasons:

1. They provide a channel for linking people who want to save with those who want to invest.

2. They play an important role in determining the money supply.

3. They are a source of the financial innovation that is expanding the ways in which we can invest our savings.

Banks play a critical role in the creation of money, not by printing $ 50 bills but by lending. Banks loans create checking account deposits, a large component of the money supply.

If you wanted to make a loan to some companies, you would not go directly to the president of the company and offer a loan. Instead, you would lend your money to such companies indirectly through financial intermediaries, institutions such as commercial banks, savings and loan associations, mutual savings banks, credit unions, insurance companies, mutual funds, pension funds, and finance companies that borrow funds from people who have saved and in turn make loans to others.

Banks are the financial intermediaries that the average person interacts with most frequently. A person who needs a loan to buy a house or a car usually obtains it from a local bank. Most Americans keep a large proportion of their financial wealth in banks