Outline 2 - Professor Akacem Money and Banking UNIT TWO...

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Professor Akacem Money and Banking UNIT TWO: Outline number 2 The Banking Industry Chapters 13, 14 and 15 I. Overview of the functions of Financial Markets: a. Charts and discussion b. Different types of financial markets c. What is Adverse Selection ? d. What is Moral Hazard ? II. Why Regulate Banks: a. Protection of Depositors b. Monetary Stability c. Consumer Protection d. What Banking Regulation Does Not Do. e. Other factors ? III. The U.S. Banking Industry: a. History of the Banking Industry b. The Regulatory Structure c. Dual Banking System d. Chartering and Examination VI. Federal Deposit Insurance: a. Deposit Insurance prior to 1934 b. Why Deposit Insurance ? c. Bank failures in the US d. Problems with Deposit Insurance e. How does FDIC handle a bank failure V. Structure of the U.S. Banking Industry vs. that of Germany and Japan a. Germany and Japan b. Concept of debt vs. Equity Finance and Moral Hazard VI. Other issues a. Bank runs b. Why do we need a lender of last resort ?
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Professor Akacem Unit Two: Outline Two The Banking Industry Chapters 13,14 and 15 I. Overview of the functions of the Financial Markets: II. Why Regulate Banks? III. The US banking industry IV. Federal Deposit Insurance V. US banking structure vs. that of Germany and Japan VI. Other Issues I. Overview of the functions of the Financial Markets: a. Charts and discussion: The reference to charts and discussion relates to the charts that I use in the regular class. We generally discuss the different charts as I am doing below. This should not stop you from doing the same via our class listserver and start a discussion. In the first lecture, we talked about the role of financial markets. Among other things, they play a very important role of financial intermediation. This role is primarily played by depository institutions (banks, savings banks, savings and loans, etc...). We also discussed the importance of such a role for an economy. We then talked about financial disintermediation . That is the case where surplus units go directly to the markets and invest their surplus by passing the depository institutions all together. Here we want to simply list the different financial markets and say a few things about them. Usually, we only think of banks when we talk about such markets. b. Different types of financial markets: 1. Equity Markets: As per our discussion in Unit One, this refers to stocks in general and to the stock market where these are traded. It represents an ownership stake in a company and the returns will vary with how well (or not so well) the company performs. 2. Debt Markets: Here we want to distinguish between short and long term markets for debt. The short term debt deals with issues that have a maturity of less than one year. Example: short term paper, particularly the money market which offers less return but a lower risk too. The long term debt refers to issues that have a maturity of more than on year. This is general rule, but we have issues that fall between 1, 2, 20 and 30 years. Example: The US government debt where an investor has a choice in terms of the maturities that are offered. This market offers all
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