Private and Public Financial Institutions

1. Private and Public Financial Institutions Federal Reserve System

2. Descriptive Overview Students will exhibit their knowledge of financial institutions by comparing and contrasting the services offered by each institution. Students will be given an overview of each type of bank, to complete this assessment.

3. Lesson Objectives/goals Students will: Identify the role of private and public institutions Specify the advantages and disadvantages of different financial institutions Determine the financial services offered by local financial institutions

4. Key Questions: What is a bank? What are the differences in commercial banks and credit unions? What are the advantages/disadvantages of using a savings and loan as opposed to a commercial bank?

5. Terminology/vocabulary Bank Commercial bank Savings and loan association Savings bank Credit union

6. Commercial Banks Full range of services Checking, savings and NOW accounts Make loans to individual and businesses Issue credit cards Manage retirement accounts

7. Commercial Banks Have a department that helps customers manage property and investments Accounts are insured by a government agency called the federal deposit insurance corporation Each depositor is insured up to $100,000 Owned by stockholders like corporations who buy shares Shareholders receive cash dividends from the profits made by the bank

8. Savings and Loan Associations Began in the mid 1800�s to help people buy homes Still account for a large percent of home mortgage loans Have been allowed recently by federal regulations to expand services to include many of those offered by commercial banks In the past, most were owned and operated by their depositors Now 1/2 are operated and owned by stockholders

9. Savings and Loan Associations Until 1989, deposits were insured by the federal savings and loan insurance corporation During the 1980�s many of these banks were involved with risky loans and bad investments As a result, hundreds of savings and loans failed Faced with this problem and these pay offs, the FSLIC ran out of money The FDIC picked up the insurance obligations The cost was $145 billion to taxpayers

10. Savings Banks Began in the 1800�s to encourage savings by small depositors Today they offer varied services including home loans Most are located in northeastern united states Insured by the FDIC for $100,000 per depositor Were called mutual savings banks and passed their profits to the depositors in the form of interest Now most are owned by shareholders A board of directors manages the daily operations

11. Credit Unions Established usually by people who work for the same company for belong to the same organization When members make deposits, they buy shares in the organization Deposits are pooled to make low interest loans to members Depositors may write checks which are share drafts Depositors are insured up to $100,000 by the national credit union