Financial Institutions That Make Up The Us Financial System Essay

583 Words3 Pages
1. Describe the different kinds of financial institutions that make up the US financial system.

a) Commercial Banks. More than 10,000 commercial banks exist in the U.S.; all banks must be chartered. Seventy percent of all commercial banks are state banks; most large banks are national banks, chartered by the federal government.

-Diversification and Mergers. These result from numerous other investment options that attract investors.

-Commercial Interest Rates. Banks can set their own interest rates; the lowest rate allowed is the prime rate.

b) Savings and Loan Associations. These institutions accept deposits and make loans primarily for home mortgages.

c) Mutual Savings Banks and Credit Unions. Depositors in these banks are considered
…show more content…
Servicing as financial advisors, banks help customers manage their money by recommending different opportunities and serving as a securities intermediary.

d) Electronic Fund Transfer. Electric funds transfer (EFT) provides for payments and collections by transferring financial information electronically. PayPal offer online payments and money transfer among businesses and individuals, nationally and internationally, in various currencies, requiring only that recipients have an e-mail address.

3. Identify the tools the Federal Reserve System uses to control the US money supply.

a) The Board of Governors. The Fed’s bond of governors consists of seven members appointed by the U.S. President for overlapping terms of 14 years.

b) Reserve Banks. The Fed consists of 12 districts. Each Federal Reserve Bank holds reserve deposits from sets the discount rate for commercial banks in its geographic region. Reserve banks also play a major role in the nation’s check-cleaning process.

c) Open Market Committee. The Federal Open Market Committee is responsible for formulating the Fed’s monetary policies to promote economic stability of Governors, the president of the Federal Reserve Bank of New York, and the president of four other Reserve Banks, who serve on a rotating
Get Access