Lesson+1--What+Is+A+Bank_1_

Lesson+1--What+Is+A+Bank_1_ - Lesson 1What Is a Bank?...

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Unformatted text preview: Lesson 1What Is a Bank? M&B Chapter 2 What Is A Bank? A Place for the Safe- Keeping of Money A Place On Which Checks Can Be Written Channels funds to borrowers (providing for a return to savers) A Bank is a Financial Intermediary A Bank is basically a T-Account assets = liabilities + bank capital First State Bank of Dodge City asset s liabilt ies Bank Capital Bank Assets Include: Bank Building & Furniture, etc Cash in Vault Deposits at Other Banks (including the Fed) Securities (Treasury bills, bonds, etc) Loans During Good Times Banks Are Happy to make Loans, But in Bad Times favor less risky securities.Why? Bank Liabilities Include: Demand Deposits (checking accounts) Various forms of savings accounts Large Certificates of Deposits (CDs) Other borrowed monies How Do Commercial Banks Make Money? They earn more interest on assets than they pay on liabilities Consolidated USCommercial Banking System- - November 2007 Billions of dollars Sour c e: Feder al Reser v e H.8 a sse t s lia bilit ie s Ba n k cr e d it 9182.1 D e p o sits 6640.7 Tr ansaction 608.3 Se cu r it ie s in b a n k cr e d it 2465.5 Nontr ansaction 6032.4 Tr easur y and Agency secur ities 1119.1 Lar ge tim e 2032.2 Other secur ities 1346.4 Other 4000.2 Lo a n s a n d le a se s in b a n k cr e d it 6716.6 Bo r r o w in g s 2241.0 Com m er cial and industr ial 1411.9 Fr om banks in the U.S. 477.7 Real estate 3569.3 Fr om other s 1763.3 Consum er 792.2792....
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This note was uploaded on 03/24/2011 for the course ECON 301 taught by Professor Hassan during the Spring '08 term at Rutgers.

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Lesson+1--What+Is+A+Bank_1_ - Lesson 1What Is a Bank?...

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