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CHAPTER 3 (Asymmetric Information (Moral Hazard (Occur if borrowers engage…

- - - - SAVINGS & LOAN ASSOCIATIONS / MUTUAL SAVINGS BANKS
        
        Get funds by
        
        Savings deposits
        
        time & checkable deposits
        
        Use fund to make
        
        mortgage loans
        
        commercial loans
        
        CREDIT REUNION
        
        Small cooperative lending institutions of
        
        union members
        
        employees
        
        Funds from deposits (shares)->make consumer loans
        
        COMMERCIAL BANK
        
        Raise funds by issue
        
        savings deposits
        
        time deposits
        
        checkable deposits
        
        Use funds to
        
        make loans
        
        Buy government securities / municipal bonds
        
        Gather money from household-> make bigger loans
    - - Investment Bank
        
        Not take in deposit and lend them out
        
        Help corporation issue securities
        
        Earn fees by helping cor. in M&M deals
      - Finance Companies
        
        Raise funds
        
        Selling Commercial Paper
        
        Issuing Stock/Bonds
        
        Gather big amounts -> Lend small amounts to consumers/SMEs
        
        Lend funds to consumers/ small business
      - Mutual Funds
        
        Selling Shares to many individuals
        
        Use the proceeds to purchase diversified portfolios of stocks and bonds
        
        Investment can be risky
        
        Usually sold by security dealers, operated by brokerage firms
      - Money Market mutual Funds
        
        Similar to Mutual funds
        
        Also function as a depoitory institution
        
        Shareholders can write checks against the value of their shareholding
        
        Very liquid and safe
- - - - The costs associated with the cost of G&S
      - Cover
        
        communication charges
        
        legal fees
        
        info cost of finding price
        
        quality
        
        durability
    - - All fees and commissions paid when buying or selling securities
      - Cover
        
        negotiation-implementation cost
        
        monitoring cost
        
        search cost