types of financial intermediaries
Depository Institutions
Financial institutions that accept deposits from individuals and provide loans funds are liquid
types of financial intermediaries
depository institutions (banks), contractual savings institutions, and investment intermediaries
regulation of financial intermediaries
increase info available to investors and to ensure the soundness of the financial system
Federal Reserve System (the fed)
regulates all depository institutions examines the books of commercial banks that are in the system; sets the reserve requirement
Federal Deposit Insurance Corporation (FDIC)
regulates depository institutions provides insurance of up to 250000 for each depositor
Securities and Exchange Commission (SEC)
regulates financial markets and exchanges requires disclosure of information; restricts insider trading
Ensuring the Soundness of Financial Intermediaries
restriction on entry: tight regulations governing on who is allowed to set up a financial intermediary, only those with good credential and large amounts of initial funds disclosure restrictions on assets and risky activities deposit insurance limits on competition restrictions on interest rates
financial panic
The widespread collapse of financial markets and intermediaries because investors pull their funds
Saving and loan associations and mutual saving banks
a depository institution primary liability: deposits Primary asset: mortgages used to be primarily mortgages, but less restrictions blur the line between these institutions and commercial banks
commercial banks
a depository institution that raises funds primarily by issuing checkable deposits, saving deposits, and time deposits. Use the funds to make loans and buy US gov bonds. Largest financial intermediary and have the most diversified portfolio
credit unions
a depository institution which are very small and cooperative liabilities: assets assets: consumer loans
Investment Intermediaries
finance companies (commercial paper... short term debt instruments) , mutual funds, money market mutual funds (they have a deposit feature, but still an investment), hedge funds (less regualtion b/c fewer partnerships), and investment banks (can't accept deposits
Contractual Savings Institutions
financial intermediaries that acquire funds at periodic intervals on a contractual basis (insurance pension funds) regular funds so they can invest in long term securities