1.4 - Other Financial Institutions
what is a wholesale bank? What is the primary difference between credit unions and other depositor-owned financial institutions
A whole Sale Bank is a bank that specializes in ONLY business banking, Commercial banks. At Credit Unions, Customers must be members and are not-for-profit institutions.
Why is an insurance company considered a financial intermediary? what is the primary difference between depositary institutions and most nondepository institutions?
An insurance company considered a financial intermediary because they safeguard, exchange transfer money, and can be used to secure a loan. The difference is that depository are regulated and nondepository are not.
Loan companies
Just loan money usually at higher interest rates to people the bank won't
Saving & Loan Associations/Mutual Savings Banks
Focus on real estate loans
Depository Intermediaries
Get funds from the public (depositors)
Mutual Savings Banks differences (3)
Granted greater powers w/ assets/liabilities State chartered AKA Thrift Institutions
Trust companies/Pension Funds
Manage money for fee & promise to provide future income Investments are their source of revenue NOT loans - risky
Wholesale Banks
Specialize in ONLY business banking Commercial banks
Who owns commercial banks?
Stockholders
Other names for Saving/Loan Associations (3)
Building/Loan Associations Homestead Banks Cooperative Banks
Currency Exchanges
Cash checks/sell money orders for a fee Locate in areas with less/no financial institutions
Non-depository Intermediaries
Do not take/hold deposits Funds from specific services/policies
Insurance companies
Earn profit by selling services Prevent financial loss/build income
Do you think payday loans and currency exchanges take advantage of those who do not have access to other forms of financial services? Why or Why not?
No, I do not think that payday loans take advantage of customers because they are doing their clients a service and the fee's come with getting the money quick.
Credit Unions
Owned by depositors Must be a member to use Non-Profit - excess revenue returned to members as dividends, reduced fees for services/interest
Brokerage Houses
Provide services for investors So investors are investing as efficiently as possible
Payday Loans
Provide very short-term loans At high interest rates
Services from depository institutions have become similar since deregulation. Why is there any need for different forms of depository institutions?
There are two primary types of financial institutions. Depository intermediaries are those that obtain funds from the public and use them to finance their business. Non-depository intermediaries are those that do not take or hold deposits. They earn their money selling specific services or policies.
How does the fact that the government backs many forms of depository institutions affect the confidence of consumers about their deposits?
This question is based on the person. If they are oblivious to our government they will be confident if the government backs a company. However, if you understand that our government is stealing money from us then you are less confident.`
Credit unions are not-for-profit institutions. They return profits to members. Why wouldn't everyone place their money only in credit unions?
Users of credit unions must be members. Membership is usually based on some type of association, such as a common employer, a certain line of work, a geographic region, or even a social or religious associ- ation.
