Economics of banking full summary: Book, Lectures, Tutorials [Distinction Level] Questions and Answers 2023

collateral - -property used to guarantee that a loan will be repaid -savings and loan associations - -banks originally established to help people buy homes -credit unions - -banks that are owned by their members to create a pool of money for low-interest loans -federal reserve system - -the U.S. banking system that handles the banking needs of the federal government and regulates the money supply -discount rate - -the interest rate federal reserve banks charge on loans to member banks -discounting - -deducting interest on loans before giving money to the borrower -WHY DID BANKS FIRST BECOME NECESSARY? - -People had difficulty finding a safe place to keep their riches -TYPES OF BANKS - -- commercial banks - savings and loans associations - saving banks - credit unions -COMMERCIAL BANKS - -- offer a full range of services like checkings, savings and NOW accounts - make loans to individuals and businesses - accounts are insured by the federal reserve system up to $100,000 -SAVINGS AND LOANS ASSOCIATIONS - -- large percentage of home mortgage loans - 1980's federal legislation allowed savings and loans banks to expand their services -SAVINGS BANKS - -- began in 1800's to encourage people who could make only very small deposits to save -CREDIT UNIONS - -- established by people who work for a single company or belong to a single organization - owned and operated by their members -HOW ARE ALL BANKS SIMILAR? - -- they all offer places for people to deposit their money and are insured in some way