The first in a new series of Smart Investing programs available at the Emmet O'Neal Library, funded by the American Library Association and the Financial Industry Regulatory Authority.

2. Disclaimer
• Andreas Rauterkus is not a registered
investment advisor or broker/dealer. Readers
are advised that the material contained herein
should be used solely for informational
purposes. Andreas Rauterkus does not purport
to tell or suggest which investment securities
attendants should buy or sell for themselves.
You should always conduct your own research
and due diligence and obtain professional
advice before making any investment decision.

3. Topics Covered
• What is a bank?
• Different kinds of banks
• The Role of regulators/regulation
– What is the FDIC?
– What does the FDIC do?
• The Federal Reserve System
– Role of a central bank
– Organization
– Monetary policy
– Quantitative Easing

4. Banking Basics
• A bank (credit union, or thrift) is an institution that
accepts deposits and makes loans
• Money-center banks
– Industry leaders
– Cover whole regions, nations, and continents
– Offer the widest possible menu of financial services
• Community banks
– Much smaller
– Service local communities and towns
– Offer a narrower, but often more personalized, menu of
financial services

5. Types of banks
• Checking account
– For every day transactions
• Savings account
– Pays interest on balance
– Limited withdrawals
• Source: Rose/Hudgins, Bank Management & Financial Services, 9th edition, McGraw-Hill

6. Largest U.S. Banks
INSURED U.S.-CHARTERED COMMERCIAL BANKS THAT HAVE CONSOLIDATED ASSETS
of $300 MILLION or MORE, RANKED by CONSOLIDATED ASSETS
As of March 31, 2015
Bank Name / Holding Co Name Nat'l Rank Consol Assets (Mil $) Pct Domestic Assets
JPMORGAN CHASE BK NA/JPMORGAN CHASE & CO 1 2,096,114 73
BANK OF AMER NA/BANK OF AMER CORP 2 1,599,746 95
WELLS FARGO BK NA/WELLS FARGO & CO 3 1,571,389 98
CITIBANK NA/CITIGROUP 4 1,335,871 56
U S BK NA/U S BC 5 405,363 100
PNC BK NA/PNC FNCL SVC GROUP 6 340,231 99
BANK OF NY MELLON/BANK OF NY MELLON CORP 7 316,699 67
STATE STREET B&TC/STATE STREET CORP 8 274,919 77
CAPITAL ONE NA/CAPITAL ONE FC 9 253,202 100
T D BK NA/TD US P & C HOLD ULC 10 234,389 100
HSBC BK USA NA/HSBC NORTH AMER HOLDS 11 194,569 98
SUNTRUST BK/SUNTRUST BK 12 185,316 100
BRANCH BKG&TC/BB&T CORP 13 184,405 100
CHASE BK USA NA/JPMORGAN CHASE & CO 14 139,341 100
FIFTH THIRD BK/FIFTH THIRD BC 15 138,030 99
GOLDMAN SACHS BK USA/GOLDMAN SACHS GROUP THE 16 127,771 100
MORGAN STANLEY BK NA/MORGAN STANLEY 17 126,857 100
REGIONS BK/REGIONS FC 18 121,435 100

7. Money Creation

8. Roles of Banking
• Source: Rose/Hudgins, Bank Management & Financial Services, 9th edition,
McGraw-Hill

9. Bank Regulation
• Why are banks closely regulated?
– Banks are among the leading repositories of the public’s
savings
– Banks are closely watched because of their power to
create money in the form of readily spendable deposits by
making loans and investments
– Banks have a long history of involvement with federal,
state, and local governments
• In the United States, banks are regulated through a
dual banking system
– Both federal and state authorities have significant
regulatory powers

10. Main Regulators
• The Federal Reserve System
– Supervises and examines all member banks
– Imposes reserve requirements
– Must approve all mergers and acquisitions
• The Office of the Comptroller of the Currency
– Issues charters for new national banks
– Supervises and examines all national banks
• The Federal Deposit Insurance Corporation (FDIC)
– Insures deposits of depository institutions
– Requires members to submit quarterly reports on their
financial condition

11. The FDIC

12. The FDIC
• The FDIC was created in 1933 in response to the thousands of bank
failures that occurred in the 1920s and early 1930s
• The standard insurance amount is $250,000 per depositor, per
insured bank, for each account ownership category.
• The FDIC insures deposits only. It does not insure securities, mutual
funds or similar types of investments that banks and thrift institutions
may offer.
• To protect insured depositors, the FDIC responds immediately when a
bank or thrift institution fails
• The FDIC has several options for resolving institution failures, but the
one most used is to sell deposits and loans of the failed institution to
another institution.
• http://www.cbsnews.com/news/your-bank-has-failed-what-happens-
next/

13. What is the Federal Reserve?
• The Federal Reserve is the central bank of the
United States.
• A central bank is the government agency that
oversees the banking system and is responsible
for the amount of money and credit in the
economy.

14. What are the Federal Reserve’s responsibilities?
• To regulate bank holding companies and
state chartered banks.
• To supply money and credit to the economy
to maintain stable prices and full
employment.
• To ensure the smooth functioning of the
payments system.
• To act as the government’s bank.

15. The Federal Reserve System
F. Mishkin, THE ECONOMICS OF MONEY AND THE ECONOMIC POLICY REVIEW. (c)
1998 Frederic S. Mishkin. Reproduced by Addison Wesley Longman. All rights reserved.

16. Structure of the Federal Reserve
F. Mishkin, THE ECONOMICS OF MONEY AND THE ECONOMIC POLICY REVIEW. (c)
1998 Frederic S. Mishkin. Reproduced by Addison Wesley Longman. All rights reserved.

17. The Fed’s Objectives
• “Stable prices”
• “Maximum employment”
• Moderate long-term interest rates

18. The Fed’s Monetary Policy Tools
• The federal funds rate
– An interbank overnight interest
rate
• The discount rate
– Lender of last resort
• Reserve requirements
– Bank deposits held in cash

19. What is Quantitative Easing?
• Purchases of government securities or other
securities from the market in order to lower
interest rates and increase the money supply.
• Quantitative easing is considered when short-
term interest rates are at or approaching zero,
and does not involve the printing of new
banknotes.
• Asset holdings of the federal reserve rose from
about 1 trillion in September 2008 to almost 4.5
trillion in October 2015

20. Any Questions?