1. 17-1 Banks and Other Financial Institutions
Goals
Explain the purpose of the Federal Reserve System
List the types of financial institutions.
Discuss factors for selecting a financial institution.

2. The Banking System The Federal Reserve System
Most banks attempt to attract the deposits of customers.
As an individual you cannot open an account in a Federal Reserve Bank because it is a bank for banks.
The federal government set up the Federal Reserve System (Fed) to supervise and regulate member banks and to help banks serve the public efficiently.
Banks that join the system are known as member bank.
Federal Reserve Activities
One service provided by the Fed is the holding of reserves.
Banks cannot lend all of the money they receive from customers
A bank will only lend a certain percentage of deposited funds.
Another service of the Federal Reserve System is clearing checks for member banks.
Clearing refers to the paying of checks among different banks in different locations.

3. Cont…The Banking System
Banking and the economy
Several million people work in banks, savings and loan associations, credit unions, and other financial institutions.
These are ways individuals use banking services:
Borrow money to build roads.
Borrow money to buy seeds for crops.
Deposit cash from business operations.
Finance a college education.
Invest for retirement.
Obtain a mortgage.
Process credit card transactions.
Save for a vacation.

4. Types of Financial Institutions
Commercial Banks
This is the most common way of banking.
Commercial banks are often called full-service banks because they offer a wide range of financial services.
Savings and Loan
Traditionally, a savings and loan association (S&L) specialized in savings accounts and making loans for home mortgages.
Today, many S&Ls use the words savings bank in their names.
Mutual Savings Bank
A mutual savings bank is a savings bank that is owned by, and operated for the benefit of its depositors.
Credit Unions
A credit union is a user-owned, not-for-profit, cooperative financial institution.
Deposit Institutions
Deposit institutions, also called depository intermediaries, accept deposits from people and businesses and use them to finance their business.

5. Cont...Types of Financial Institutions
Non-Deposit Financial Institutions
Also called non-depository intermediaries.
They do not take or hold deposits.
Life Insurance Companies
People commonly buy life insurance to provide financial security for their dependents.
Investment Companies
Many investors own shares of one of the more than 60,000mutual funds worldwide.
Investment companies make these mutual funds available.
Consumer Finance Companies
A business that specializes in making loans for long-lasting or durable goods, such as cars and refrigerators, and for financial emergencies .
Mortgage Companies
Mortgage companies , along with other financial institutions, provide loans for buying a home or other real estate.
Check-Cashing Outlets
People who do not have bank accounts may use check-cashing outlets (CCOs) to cash paychecks and obtain other financial services.
Some services provided at a CCO are more expensive than at other business.
Pawnshops
Pawnshops make loans based on the value of some tangible object, such as jewelry or other valuable items.

6. Selecting a Financial Institution
Services Offered
There are four basic types of banking services you will use.
Savings account
Checking and payment accounts
Loans and other credit plans
Other services, such as safe-deposit boxes and investment advice
Safety
The Federal agency that helps to regulate banks and other financial institution is the Federal Deposit
Convenience
Do you want 24-hour banking service? Do you want branch offices near your work or home? These are some of the factors you will need to think about as you decide about convenience.
Fees and Charges
Financial services have costs.
Restrictions
Costs are not measured in dollars.
If you must keep $500 on deposit to get “free” checking.
You may be losing the chance to earn interest on those funds at another institution.

7. Questions
The financial institution most likely to charge the highest rate for a loan would be a…
Bank
Pawnshop
Credit union
Mortgage company
If deposit insurance is most important to you when selecting a financial institution, you are most concerned with…
Safety
Convenience
Services
fees