Result: 

- State chartered banks innovate, creating checkable deposits.

- Dual Banking System: state chartered and nationally chartered banks operate side by side.

Intent: Prevent bank from forming monopolies.

Result: - Efficient banks cannot expand into territory of ineffiecient banks.

- One bank serves entire community

- No diversification

- Banks unable to grow

- Local economies suffer.

- created the Federal Deposit Insurance Corporation(FDIC)

- limited activities of commercial banks

- provided insurance to depositors, in case of a bank failure.

- Reversed the McFadden Act

- allowed banks to diversify geographically.

Results: Banks became more profitable.

-repealed the Glass-Steagall Act

-eliminated restrictions on banks' activites

-renewed concerns about potential mismanagement of large financial holding companies.

-Banks that don't have branches.

- Are disappearing while merging with branch banks.

- when the average cost of producing a good or service falls as the quantity produced increases.

- Big banks have lower cost, one CEO, one office building, etc.

- when the average cost of producing a good or service falls as the number of different types of goods produced increases.

- One-stop shopping for financial services, only one brand name to maintain.

1. Diversification - bank's profitablilty relies on more than one line of business

2. Economies of Scale

3. Economies of Scope

- Accept premiums from policyholders in exchange for the promise of compensation if certain events occur.

- Whole life insurance- policy that insures a person until they die.

Pros: Generates "cash value"

Cons: rates of return very low, and premiums expensive

-Term life insurance- insured for a certain period of time

Pros: Renewable, premiums very reasonable

Cons: might die outside of term

- everything you contribute is yours no matter how long you stay.

Defined Contribution: set amount contributed to retirement account from each paycheck during worker's career. Workers recieve contributions plus interest at retirement.

Defined Benefit: worker receives set payment in retirement based on vesting(years of service and top salary) ---better if you stay at company for ever!!

Investment banks: Underwriting of new securities

- purchase new securities from firm

- sell to clients

**Reputation is key**

1. Consumer finance: small loans for appliances, furniture, etc.

2. Business finance: equipment leasing, inventory loans, A/R loans, etc.

3. Sales finance: larger consumer loans for autos, boats, etc.

-Home ownership through mortgages

-Fannie Mae, Freddie Mac, Ginnie Mae

-College attendence through loans

- Sallie Mae

- Farm loan system

- issue short-term debt to finance loans.