Presentation_2-5_marked - Banking Econ 312 Prof. M. Cahill...

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Banking Econ 312 Prof. M. Cahill Fall 2009
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The basic banking business (Ch. 9) Obtain funds by issuing… Liabilities Issue deposits Liquid, variable interest rate Checkable deposits (demand, NOW, ATS) Savings accounts, MMDAs Small CDs Banks must hold reserves against some deposits Checking accounts: about 10% Meet on average over two week period Borrowings Federal funds, eurodollar Commercial paper, bonds Longer-term loans from other banks
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The banking business Use funds to purchase…. Assets Reserves Vault cash (in vault, tills, ATMs, etc.) Reserve balances with Fed Started paying interest in 2008 Required: fed funds target – 0.1% Excess: fed funds target – 0.75% Loans Real estate, business, consumer Treasury bonds, agency bonds, munis
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History of banking and regulation Read text (Ch. 10) for details Important historical regulations Capital requirements Banks must have a certain level of net worth (NW=A-L)
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Presentation_2-5_marked - Banking Econ 312 Prof. M. Cahill...

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