Lesson 1 - Lesson 1 What is a Bank? (Chapter 2) January 25,...

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Lesson 1 – What is a Bank? (Chapter 2) January 25, 2012 - A place for the safe-keeping of money - A place on which checks can be written - Channels funds to borrows (providing for a return to savers) A bank is a financial intermediary (see figure 1) Ban Assets Include: - Bank Building & Furniture, etc. - Cash in Vault - Deposits at Other Banks (including the Fed) - Securities (treasury bills, bonds, etc.) - Loans 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 assets than they pay on liabilities. US Banks – Charters National Banks – chartered by the Federal Government (must be members of the Federal Reserve) State Banks – chartered by individual states (Federal Reserve membership optional) Financial Intermediaries other than Commercial Banks… Other “T-accounts” - Thrifts – Savings Institutions - Mutual Funds - Money Market Mutual Funds
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This note was uploaded on 01/29/2012 for the course ECON 301 taught by Professor Hassan during the Spring '08 term at Rutgers.

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Lesson 1 - Lesson 1 What is a Bank? (Chapter 2) January 25,...

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