Banks are among the oldest in the history of the economy, the Inter Bank of New York, for example, was founded in 1784 and as had recently been renamed The Bank of New York Mellon in 2009. The banking system's 225th anniversary one of the oldest, largest and most important of our industries. Most American adults are often dealing with banks, on a fairly regular basis. But the banks and the banks seem rather mysterious. What do banks do? Why do they have long been an integral part of our economy? Therefore, as in the financial crisis that began in 2007, no banks, sometimes run into difficulties and serious problems for the country?
Banks have two important economic functions. First, a payment system is created and a modern economy can not function well without an effective payment. We make most of our payments by check, slide the used by banks or credit cards with them and paying bills through online banking. Most of the money supply of the country is actually money from the bank; the rest of the currency by the government, namely the Federal Reserve notes and coins "legal" issued. We have confidence in bank money, because we will change it to the bank or legal ATM. Banks are obliged to keep legal monetary reserves to make this exchange, when we ask.
The second main feature of banks is financial intermediation, loan or invest the money deposited with them or to create credit to businesses, households and governments. This is the business side of the Bank. Most banks are profit with shareholders that is required to start and maintain provide a bank activity capital. Banks make their profits and cover their costs by charging borrowers more for loans than to pay to have the depositors money in the bank. The mediation role of the banks is very important because it helped fund the many generations of entrepreneurs who built the US economy and ordinary shops to keep from year to year. But it is an inherently risky business. If the borrower to repay the loan with interest? What happens if the borrower for the loan? What happens to the banking system and the economy if a large number of borrowers can not or will not repay their loans? And if not to keep them in the pursuit of profit, the banks stocks and equity in accordance with its own stability?
Banks have two important economic functions. First, a payment system is created and a modern economy can not function well without an effective payment. We make most of our payments by check, slide the used by banks or credit cards with them and paying bills through online banking. Most of the money supply of the country is actually money from the bank; the rest of the currency by the government, namely the Federal Reserve notes and coins "legal" issued. We have confidence in bank money, because we will change it to the bank or legal ATM. Banks are obliged to keep legal monetary reserves to make this exchange, when we ask.
The second main feature of banks is financial intermediation, loan or invest the money deposited with them or to create credit to businesses, households and governments. This is the business side of the Bank. Most banks are profit with shareholders that is required to start and maintain provide a bank activity capital. Banks make their profits and cover their costs by charging borrowers more for loans than to pay to have the depositors money in the bank. The mediation role of the banks is very important because it helped fund the many generations of entrepreneurs who built the US economy and ordinary shops to keep from year to year. But it is an inherently risky business. If the borrower to repay the loan with interest? What happens if the borrower for the loan? What happens to the banking system and the economy if a large number of borrowers can not or will not repay their loans? And if not to keep them in the pursuit of profit, the banks stocks and equity in accordance with its own stability?
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