Abstract

Among all intermediaries, commercial banks have historically occupied and presently occupy a dominant and vital place in the U.S. financial system. Because of this, and because they were not as legally circumscribed in the range of assets they could acquire as, for example, savings and loan associations, theories were developed to guide bankers in their asset selections. These theories will be discussed in this chapter. As an incidental part of the discussion, we will discover the types of loans depository institutions make. We start the discussion by examining the characteristics of the balance sheet of a commercial bank.

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