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 The Federal Reserve system-is a bank for banks  You cannot personally open an account  Federal reserve system- set up by the government to supervise and regulate member banks.  National banks must join  State banks may join  Banks that join are known as member banks  The United states is divided up into 12 federal reserve districts with a central federal reserve bank in each district see page 423

 Holding reserves-  Banks cannot lend all  Certain amount on hand  Federal reserve holds reserves  A bank will only lend a certain percent of deposits.  Example on page 423

 Clearing checks in different cities  Clearing refers to the paying of checks among different banks.  The fed process millions of checks per day  Insure that the correct amounts are being deducted.

 Banking activities  Build homes  Start new businesses  Plant crops  Finance educations  Buy goods  Pave streets  Invest for retirement  Build Hospitals  Buy new business equipment  The money you deposit makes investments possible.  Your money does not just stay in the bank.

 Deposit institutions-accept deposits from people and businesses and use them to finance their business.  Commercial banks  Most common bank  Also called full service banks  They offer a wide variety of financial services  They offer checking accounts, provide savings accounts, make loans to individuals and businesses and offer other services.  Owned by a person or company

 Savings and loan associations  Specialize in savings accounts and making home loans  Recently have expanded to a variety of financial services  Are now more like a bank.  Owned by private person or company  Mutual savings banks  Owned and operated for the benefit of its depositors  Profits are distributed in proportion to the amount of business each participant does with the company.  Mainly savings and home loans  Located mainly in the northeastern part of the United States

 Credit Unions  User owned, not for profit  Usually part of a labor union, government agency, company or a certain profession.  Usually savings and loans  When a person deposits money they become a member

 Non deposit financial institutions do not take or hold deposits. They earn their money selling specific services or polices  Life Insurance companies  People buy policies to insure security for their dependants  They also offer investments  Investment companies  People can choose investment opportunities for long term growth of their money  Many investors own shares of one of the more than 15,000 mutual funds worldwide  Investment companies make these mutual funds available

 Consumer Finance companies  Specialize in making loans for long lasting or durable goods such as cars and refrigerators and for financial emergencies.  They do not accept savings deposits  Mortgage companies  Provide loans for buying houses or property

 Check cashing outlets  People who may not have banking accounts will use check cashing outlets  Offer services such as tax filing, money orders, private postal boxes, utility bill payment and the sale of bus and subway tokens  They charge you a fee for their services  Pawnshops  Make loans based on the value of some tangible object such as jewelry  They usually charge a high fee

 Services offer- Most typical service offered are:  Savings accounts  Checking and payment accounts  Loans and other credit plans  Other services, such as safe deposit boxes, trusts, and investment advice  You must determine what services you need  Find the highest interest rate for savings  Find the lowest for loans

 Federal Deposit Insurance corporation (FDIC)  Protects depositors money in case of failure of a bank or financial institution.  Insures all accounts in the same name at each bank up to the amount of $250,000.  Almost 99% of banks have FDIC insurance  The National Credit Union Administration (NCAU)  Regulates credit unions  Insures accounts up to $100,000  Most banks have federal insurance but do not assume that every one does.

 Do you want 24 hour services?  Do you want branch offices near your home or work?  You will need to ask yourself these questions when choosing a bank

 Financial services have costs  Compare your needs with the price you pay  Remember seemingly low fees add up overtime.

 Some accounts you must have a minimum amount in the account at all times  i.e. for a free checking account you must keep $500 at all time. You are losing a chance to earn interest if you were to have more in your savings.  If you must keep money on deposit for 2 or more years to earn a higher interest rate you are restricted from using those funds