Chapter Twenty-

Six:Money, Banking,

and Finance

What is Money?

Currency Real Estate

Checking Account

Share of Stock

Precious Metal

MoreLiquid

LessLiquid

Liquidity Continuum

Figure 26.1: The Liquidity Continuum

The Banking System

Table 26.1: A Simplified Balance Sheet of a Private Bank

Table 26.2: Bank Types

  Chief Functions

Retail Safekeeping of money; checking accounts; loansCommercial Similar to retail bank but more diverse clients including businesses

Savings and Loan Similar to retail bank but specializing in loans, particularly mortgages

Credit Union Same as a retail bank, but cooperatively owned by customers

Private Caters almost exclusively to high net worth individuals; functions extend beyond traditional banking into variety of financial services

InvestmentNo traditional banking functions; involved in underwriting and issuing securities, assistance with company mergers and acquisitions, market making, and general advice to corporations

Central Overseeing the monetary and interest rate stability of the national economy by directly influencing the money supply