ECON 252 (2008) - Lecture 13 - Banking: Successes and Failures

Lecture 13 - Banking: Successes and Failures

Overview

Banks, which were first created in primitive form by goldsmiths hundreds of years ago, have evolved into central economic institutions that manage the allocation of resources, channel information about productive activities, and offer the public convenient investment vehicles. Although there are several types of banking institutions, including credit unions and Saving and Loan Associations, commercial banks are the largest and most important in the banking system. Banks are designed to address three significant problems in capital markets: adverse selection, moral hazard, and liquidity. Banks make money by borrowing long and lending short and use fractional reserves to lend more funds than are deposited. History has seen numerous problems in banks, including bank runs and insolvency. Government support and regulation, such as those implemented via the Basel Accord, as well as rating agencies help to ensure that investors trust the banks with which they have relations.

Resources

application/pdf iconPowerPoint slides from screen - Lecture 13 [PDF]
application/pdf iconProblem Set 5: Banking, Mortgage Lending, and Securitization [PDF]

Assignment

Problem Set 5

Course Media

Transcript

html

Audio

mp3

Low Bandwidth Video

mov [100MB]

High Bandwidth Video

mov [500MB]