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Note #4 - also to solve the asymmetric information problems...

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ECON 133 Securities Markets Lecture 4 Jia-Yuh Chen August 3, 2009
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Stock of the Day I Deutsche Bank AG (DB) I Survivor of 2008 crash I P/E comparison
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Banks I Commercial banks: receive deposits and make loans I Investment banks: purchase, underwrite, and resell securities I Central banks: banker&s bank
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Other Depository institutions Thrifts I I Savings bank I Credit unions
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Banks I I Fractional banking I Balance sheet of banks I deposits are liabilities I loans are assets I Business income: I spread income I credit risk I regulatory risk I interest rate risk: borrow short and lend long ; S±L crisis in 1980s I fee income
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Banks as Financial Intermediaries intermediation I Adverse selection I Moral hazard I Liquidity Note! Rating agencies, such as Moody±s and Standard and Poor±s, are
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Unformatted text preview: also to solve the asymmetric information problems. Banking Crisis and Regulations I Fractional banking and bank runs I Federal Reserve Board, O¢ ce of the Comptroller of the Currency, and Federal Depository Insurance Corporation (FDIC) I Glass-Steagall Act (1933) I Gramm-Leach-Bliley Act (1999) I Insurance coverage : $250,000 I Capital requirements I Basel I and Basel II I Capital is de&ned as Tier 1 and Tier 2 with minimum requirement for each tier I Tier 1: core capital, including common stocks I Tier 2: supplementary capital, including reserves and debts I Risk weights are established: treasuries (0%), MBS (20%), mortagages (50%), and corporate bonds (100%) I Unleveraging and &re sale...
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Note #4 - also to solve the asymmetric information problems...

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