Chapter 5 - Chapter 5 Financial institutions: are firms...

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Financial institutions: are firms whose assets and liabilities are primarily financial instruments. Depository Institutions: Financial institutions that accept deposits. Includes banks, savings and loans, savings banks, and credit unions. We’ll call all of these Banks No-depository institutions: Financial institutions – insurance companies, pension funds, mutual funds and the like – do not accept deposits. 12-1 Chapter 5
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Balance Sheet of Commercial Banks: Assets, Liabilities, and Capital The balance sheet identity: Bank Assets = Bank Liabilities + Bank Capital When one side changes, the other side must change as well. 12-2
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Commercial Bank Assets: Uses of Funds Cash Reserves = vault cash + deposits at the Fed Cash Items in process of collection Balances held at other banks Securities These are very liquid. They are secondary reserves . U.S. Commercial banks are not allowed to purchase stocks. Loans
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This note was uploaded on 02/12/2012 for the course ECON 101 taught by Professor Abrams during the Spring '11 term at Adams State University.

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Chapter 5 - Chapter 5 Financial institutions: are firms...

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