Financial Immediaries

Financial Intermediaries

Jeff Bush

FIN/320

August 01, 2010

Paul Hemminger

Financial Intermediaries

Financial intermediaries act as the middleman for joining two unrelated parties in investing and growth. “Banks are not the only types of financial intermediaries, other organization can act as intermediaries as well. Financial institutions can be divided into two types: depository and non-depository. For depository we have traditional banks, credit unions, and savings and loan depositories. The other type, non-depository, includes financial advisors and brokers, insurance companies, life insurance companies, mutual funds, and pension funds are all competing financial intermediaries” (Hitt, 2010). Financial institutions play a big role in financial intermediation as they channel monies from loans and savings to the needs of individuals, governments, and businesses.

The U. S. Federal Reserve manages our nation's supply of money and credit. They are the center of the nation's financial system. They keep the wheels of businesses rolling with payment services, such as electronic funds transfer and check-clearing. They serve as the banker for the federal government by providing financial services for the U.S. Department of the Treasury. They supervise and regulate a large share of the nation's banking and financial system. And they administer banking and finance-related consumer protection laws.

The U. S. Federal Reserve influences our nation’s economy by using monetary policy. The three tools used by the Federal Reserve to stimulate the economy are; changing the reserve requirement, changing the discount rate, and open market operations. The reserve requirements are the amount of funds that a bank must hold in deposit against its depositor’s liabilities. If the Federal Reserve increases a bank’s reserve requirement, the bank will have to call in loans to for the cash flow to pay for the increase (Dallas...