1. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved. CHAPTER 11 An Introduction to Financial Intermediaries and Risk

2. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved. Financial Assets and Liabilities of Commercial Banks, June 30, 2001 (in Billions of Dollars) Financial assets$6,592.2100.0% Reserves 56.2.09 Vault cash 37.2.06 Deposits at the Fed 17.6.03 Loans 3,899.2 59 Business loans 1,462.9 22.2 Mortgages 1,723.1 26.1 Consumer credit 540.2 8.2 Security credit 173.0 2.6 U.S. Government securities 875.5 13.3 Treasury securities 178.1 2.7 Government agency securities 697.5 10.6 Municipal securities 116.2 1.8 Corporate and foreign bonds 326.1 4.9 Miscellaneous 1,319.4 20 Liabilities$6,503.198.8% Checkable deposits 503.4 7.6 Small time and savings deposits 2,342.135.5 (including money market and deposit accounts) Large time deposits 904.813.7 Fed funds and repurchase agreements (net) 823.612.5 Total a Percent of Total Assets a

3. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved. Financial Assets and Liabilities of Commercial Banks, June 30, 2001 (in Billions of Dollars) (continued) Commercial paper 69.4 1 Corporate bonds 295.4 4.5 Loans and advances 179.0 2.7 Miscellaneous1,277.819.4 Net Interbank liabilities 107.6 1.6 To the Fed -0.2<.03 To domestic banks 5.3 <.1 To foreign banks (eurodollar borrowings) 102.6 1.5 Net worth (capital)$89.1 b 1.4 b Total a Percent of Total Assets a a Detials may not sum to totals because of rounding. b This item is not proposed as a measure of capital for use in capital adequacy analysis. SOURCE: Flow of Funds Accounts, Z1, Second Quarter 2001. Board of Governors of the Federal Reserve System (September 18, 2001): 69.

4. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved. Financial Assets and Liabilities of Savings Associations, June 30, 2001 (in Billions of Dollars) Financial assets $1,273.9 100% Reserves at the Fed 1.0 <.1 Checkable deposits and currency 21.7 1.7 Time and savings deposits 2.4.2 Fed funds and repurchase agreements 22.0 1.7 U.S. government securities 158.2 12.4 Municipal securities 4.0.3 Corporate and foreign bonds 93.1 7.3 Mortgages 751.7 59 Consumer credit 65.3 5.1 Corporate equities 25.6 2.0 Loans and advances 43.8 3.4 Miscellaneous 85.1 6.7 Liabilities$1,241.3 97.4% Deposits 755.5 59.3 Checkable 291.9 22.9 Small time and savings 307.2 24.1 Large time 156.4 12.3 Repurchase agreements 69.5 5.5 Corporate bonds 6.4.5 Loans and advances 288.1 22.6 Miscellaneous 121.7 9.5 Net worth (capital) $ 32.6 b 2.6% b Total a Percent of Total Assets a a Detials may not sum to totals because of rounding. b This item is not proposed as a measure of capital for use in capital adequacy analysis. SOURCE: Flow of Funds Accounts, Z1, Second Quarter 2001. Board of Governors of the Federal Reserve System (September 18, 2001): 73.

5. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved. Financial Assets and Liabilities of Credit, June 30, 2001 (in Billions of Dollars) Total a Percent of Total Assets a Financial assets$476.2 100% Checkable deposits and currency 18.1 3.8 Time and savings deposits 18.7 3.9 Fed funds and repurchase agreements 8.3 1.7 U.S. government securities (Treasury and agency securities) 72.2 15.2 Mortgages 130.3 27.4 Consumer credit 187.0 39.3 Miscellaneous 41.5 8.7 Liabilities$431.3 90.6% Shares/deposits 426.3 89.5 Checkable 54.2 11.4 Small time and savings 342.8 72.0 Large time 29.3 6.2 Miscellaneous 5.0 1.0 Net worth (capital)$44.9 a 9.4% b a Detials may not sum to totals because of rounding. b This item is not proposed as a measure of capital for use in capital adequacy analysis. SOURCE: Flow of Funds Accounts, Z1, Second Quarter 2001. Board of Governors of the Federal Reserve System (September 18, 2001): 74.

6. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved. Financial Assets and Liabilities of Life Insurance Companies, June 30, 2001 (in Billions of Dollars) Total a Percent of Total Assets a Financial assets$3,223.6 100% Checkable deposits and currency and money market fund shares 216.9 6.7 Corporate and foreign bonds 1,280.3 39.7 Corporate equities 955.1 29.6 U.S. government securities 297.7 9.2 Mortgages 236.1 7.3 Policy loans 103.1 3.2 Mutual fund shares 46.1 1.4 Open market paper 53.5 1.7 Miscellaneous 29.6.9 Liabilities$3,006.2 93.3% Life insurance reserves 807.5 25.0 Pension fund reserves 1,405.1 43.6 Miscellaneous 791.7 24.6 Net worth (capital) $217.4 6.7% b a Detials may not sum to totals because of rounding. b This item is not proposed as a measure of capital for use in capital adequacy analysis. SOURCE: Flow of Funds Accounts, Z1, Second Quarter 2001. Board of Governors of the Federal Reserve System (September 18, 2001): 75.

7. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved. Financial Assets and Liabilities of Public and Private Funds, June 30, 2001 (in Billions of Dollars) Total a Percent of Total Assets a Financial assets$6,651.8 100% Checkable deposits and currency 17.26 Time and savings deposits 118.8 1.8 Repurchase agreements 70.8 1.1 Money market mutual funds 85.9 1.3 Mutual funds 800.0 12 Corporate equities 3,137.7 47.2 U.S. government securities (Treasury and agency securities) 834.6 12.5 Municipals 1.5.02 Corporate and foreign bonds 690.8 10.4 Mortgages 38.6.58 Commercial paper 72.1 1.1 Miscellaneous 783.7 11.8 Liabilities $6,755.5 100% Pension fund reserves $6,755.5 100% a Detials may not sum to totals because of rounding. SOURCE: Flow of Funds Accounts, Z1, Second Quarter 2001. Board of Governors of the Federal Reserve System (September 18, 2001): 76.

8. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved. Financial Assets and Liabilities of Property and Casualty Companies, June 30, 2001 (in Billions of Dollars) Total a Percent of Total Assets a Financial assets$866.1 100% Checkable deposits and currency, and repurchase agreements 4.5 Corporate equities 38.6 21.3 Municipal securities 184.7 21.5 U.S. government securities 186.1 15.2 Corporate and foreign bonds 191.2 22 Trade receivables 68.6 7.9 Miscellaneous 63.7 7.4 Liabilities$572.366.1% b Net worth$293.733.9% b a Detials may not sum to totals because of rounding. b This item is not proposed as a measure of capital for use in capital adequacy analysis. SOURCE: Flow of Funds Accounts, Z1, Second Quarter 2001. Board of Governors of the Federal Reserve System (September 18, 2001): 75.

9. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved. Financial Assets and Liabilities of Mutual Funds and Money Market Mutual Funds, June 30, 2001 (in Billions of Dollars) Total a Percent of Total Assets a Financial assets$4,269.9 100% Repurchase agreements 91.2 2.1 Corporate equities 3,025.6 70.1 U.S. government securities (Treasury and agency) 426.7 9.9 Municipal bonds 239.7 5.6 Corporate and foreign bonds 397.4 9.3 Commercial paper 87.7 2.1 Miscellaneous 1.6.04 Liabilities$4,269.9100% Mutual fund shares$4,269.9100% a Detials may not sum to totals because of rounding. b This item is not proposed as a measure of capital for use in capital adequacy analysis. SOURCE: Flow of Funds Accounts, Z1, Second Quarter 2001. Board of Governors of the Federal Reserve System (September 18, 2001): 75. Mutual Funds

10. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved. Financial Assets and Liabilities of Finance Companies, June 30, 2001 (in Billions of Dollars) (continued) Money Market Mutual FundsTotal a Percent of Total Assets a Financial assets$2,014.8 100% Checkable deposits and currency -2.8 <.14 Small time and savings deposits 171.5 8.5 Repurchase agreements 208.2 10.3 Foreign deposits 110.4 5.5 U.S. government securities (Treasury and agency) 361.3 17.9 Municipals 255.2 12.7 Commercial paper 638.2 31.7 Corporate and foreign bonds 159.9 7.9 Miscellaneous 112.8 5.6 Liabilities$2,014.8100% Money market fund shares$2,014.8100% a Detials may not sum to totals because of rounding. SOURCE: Flow of Funds Accounts, Z1, Second Quarter 2001. Board of Governors of the Federal Reserve System (September 18, 2001): 77.

11. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved. Financial Assets and Liabilities of Finance Companies, June 30, 2001 (in Billions of Dollars) Total a Percent of Total Assets a Financial assets$1,123.8 100% Checkable deposits and currency 29.3 2.6 Mortgages 157.1 14.0 Consumer credit 191.0 17.0 Other Loans 481.5 42.8 Miscellaneous 264.9 23.6 Liabilities$1,160.2103.2% Corporate bonds 504.6 44.9 Bank loans 45.2 4.0 Commercial paper 177.3 15.8 Miscellaneous 423.6 37.7 Net worth (capital) -36.4 b -3.2% b a Detials may not sum to totals because of rounding. b This item is not proposed as a measure of capital for use in capital adequacy analysis. SOURCE: Flow of Funds Accounts, Z1, Second Quarter 2001. Board of Governors of the Federal Reserve System (September 18, 2001): 79.

12. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved. Total Financial Assets of Principal FIs (in Billions of Dollars) 1970 1984 1991 1998 2001* Deposit-type: Commercial banks$505$1,951$3,414.4$5,635.5$6,592.2 Savings associations 252 1,180 1,144.9 1,088.1 1,273.9 Credit unions 18 116 240.0 394.5 476.2 Contractual-type: Life insurance companies 201 697 1,499.5 2,819.5 3,233.6 Property and casualty companies 50 251 575.8 884.0 866.1 Pension funds 170 1,211 1,892.1 6,675.3 6,651.8 Investment-type: Mutual funds 47 368 840.7 3,626.1 4,269.9 Money market mutual fund — — 535.0 1,334.2 2,014.8 *Figures for 2001 are as of June 30, 2001. SOURCE: Figures for 1970 are from the Annual Statistical Digest, Federal Reserve Board, 1991, various pages. Figures for 1984 and 1990 are from the Flow of Funds Accounts, Z1, Fourth Quarters, 1984, 1990,. 1998. Figures for 2001 are from the Flow of Funds Accounts, Z1, Second Quarter, 2001, various pages.