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Financial Intermediaries - Essay Example
Pages 2 (502 words)
Financial intermediaries as the term suggests, are people or organizations which help in the regulation of money in return for a share for themselves. For example, if a person wants a loan, he will go to a commercial bank to take it. But from where did the bank get the money to provide this loan to the customer Obviously from another customer who deposited this money earlier at some point due to any reason…
The most important one is security. As banks and other financial institutions playing this role have the proper expertise to handle the flow of cash and make sure that it is returned on a fixed time and date, they avoid any miscommunications and make sure that potential clients don't turn out to become criminals by not returning the loan. Therefore, by putting a saver's eggs in a safe basket, they ensure that they are not stolen. Secondly, as these financial intermediaries are properly qualified to do this particular task, they are also better able to judge to whom it is safer to lend a saver's money to. They keep an updated record of the types of customers who borrow from them and of their repayment schedules. This helps in making predictions about which type of customer is a better choice to do business of lending money.
The US Government's role is twofold in the economy. It has to look after the local and international intermediaries and as well as act as an intermediary itself. This is done by two separate governmental departments. The first is the SEC (Securities and Exchange Commission) and the second is the FDIC (Federal Deposit Insurance Corporation). ...
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