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Most US banks are privately owned, profit-making organizatio

Most US banks are privately owned, profit-making organizations. Although they provide a service just as many other businesses, banks differ because of their importance in the macro-economy. Policymakers have debated whether banks should be permitted to engage in other lines of business such as selling insurance or buying and selling stocks and bonds.
1.What are the risks for the macro-economy if a bank fails that does not exist for other businesses?
2.Should banks be allowed to enter other lines of business? Why or why not?

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Most US banks are privately owned, profit-making organizations. Although they provide a service just as many other businesses, banks differ because of their importance in the macro-economy. Policymakers have debated whether banks should be permitted to engage in other lines of business such as selling insurance or buying and selling stocks and bonds.
1.What are the risks for the macro-economy if a bank fails that does not exist for other businesses?
2.Should banks be allowed to enter other lines of business? Why or why not?

Solution:

What are the risks for the macro-economy if a bank fails that does not exist for other businesses?

Banks are unique from other businesses to begin with, in the respect that the bank is holding customer deposits. Because of this, the bank has direct control over the deposits. Customers place high levels of confidence in their banks. A bank is it's only line of business. As of now, we don't see banks engaging in other types of businesses, that are not bank related. We see banks offering financial products, but not running real estate ventures, or in other widespread markets. Due to the fact that banks only have one main line of ...

Solution Summary

Most US banks are privately owned, profit-making organizations. Although they provide a service just as many other businesses, banks differ because of their importance in the macro-economy. Policymakers have debated whether banks should be permitted to engage in other lines of business such as selling insurance or buying and selling stocks and bonds.
1.What are the risks for the macro-economy if a bank fails that does not exist for other businesses?
2.Should banks be allowed to enter other lines of business? Why or why not?

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