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Money and Money and BankingBanking

What is Money?What is Money?Functions of Money 1.medium of exchange 2. Store of value (hold wealth

until ready to use) 3. Measure of value (how much goods & services worth)

Types of Money Anything people are willing to accept in exchange for

goods & services (ex. Animal hides, gems, tobacco). Most familiar type is coins & currency (coins & paper money)

Why money has value-people’s confidence in money

Types of BanksTypes of Banks Commercial Banks-offer full banking services. Most

people have their checking & saving accounts in commercial banks

Savings and Loan association (S&Ls)-traditionally loaned money to people buying homes. Today offer many of the same services as commercial banks

Credit Unions-work on a not-for-profit basis. Sponsored by labor unions, government, & big business. Open only to members of the group that sponsors the bank. Low cost financial institution

Types of ServicesTypes of Services

checking accountschecking accounts savings accountssavings accounts certificates of deposit (CD)-loan a certificates of deposit (CD)-loan a

specific amount of money to bank and in specific amount of money to bank and in return the bank pays you interest during return the bank pays you interest during that time period.that time period.

make loans- home, car, equity, etcmake loans- home, car, equity, etc

Banks are closely regulated. The United Banks are closely regulated. The United States has one of the safest financial States has one of the safest financial systems in the world. Banks carry systems in the world. Banks carry insurance with the Federal Deposit insurance with the Federal Deposit Insurance Corporation (FDIC) to protect Insurance Corporation (FDIC) to protect the customer’s money in case the bank the customer’s money in case the bank fails.fails.

Short History of BankingShort History of Banking Before Civil War, money was printed by individual

state banks 1863 National Banking Act-banks could have a

national charter & established national currency 1913 Federal Reserve Act- The Federal Reserve

would be the nation’s central bank, issue money, & control the money supply

1930s- 12,000 banks closed due to panic caused by Great Depression

1930s- FDIC established 1999 Gramm-Leach-Bliley Act-gave banks greater

freedom to offer financial services