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

Lesson+1--What+Is+A+Bank_1_ - Lesson 1-What Is a Bank M&B...

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Lesson 1—What Is a Bank? M&B Chapter 2
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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)
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A Bank is a Financial Intermediary
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A Bank is basically a “T-Account” assets = liabilities + bank capital First State Bank of Dodge City asset s liabilt ies Bank Capital
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Bank Assets Include: Bank Building & Furniture, etc Cash in Vault Deposits at Other Banks (including the Fed) Securities (Treasury bills, bonds, etc) Loans
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During “Good Times” Banks Are Happy to make Loans, But in “Bad Times” favor less risky securities….Why?
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Bank Liabilities Include: Demand Deposits (checking accounts) Various forms of savings accounts Large Certificates of Deposits (CDs) Other borrowed monies
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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 Source: Federal Reserve H.8 assets liabilities Ba nk cr e dit 9182.1 De posits 6640.7 Transaction 608.3 Se cur itie s in ba nk cr e dit 2465.5 Nontransaction 6032.4 Treasury and Agency securities 1119.1 Large tim e 2032.2 Other securities 1346.4 Other 4000.2 Loa ns a nd le a se s in ba nk cr e dit 6716.6 Bor r owings 2241.0 Com m ercial and industrial 1411.9 From banks in the U.S. 477.7 Real estate 3569.3 From others 1763.3 Consum er 792.2 Security 279.5 Due to foreign offices 104.8 Other loans and leases 663.7 Other liabilities 673.1
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