A financial market brings together borrowers and lenders (or investors) and establishes and communicates the prices at which they are willing to make transactions. Financial markets assume many shapes and forms.
The appended exhibit describes in general terms the American financial system as it relates to the credit and capital markets. The appended diagram illustrates the flows in the U.S. financial system.
Credit and capital market instruments are sometimes classified as follows: U.S. government securities, state and local government obligations, corporate and foreign bonds, mortgages, consumer credit, bank loans, and other loans (open-market paper, commercial paper, bankers' acceptances, Federal funds and security repurchase agreements, finance company loans to business, U.S. government loans, sponsored credit agency loans, and loans on insurance policies).
Federal and state governments and the securities industry attempt to protect investors through detailed regulations and supervision. Every state has blue sky laws that set forth requirements relating to licensing of securities representatives as well as registration and disclosure procedures for products offered for sale.
BANK ADMINISTRATION INSTITUTE. Interest Rates, the Markets, and the New Financial World, Bank Administration Institute, Chicago, IL, 1986.
BOWDEN, E.V., and HOLBERT, J.L. Revolution in Banking. Prentice Hall, Inc., Englewood Cliffs, NJ, 1984.
CORRIGAN, E.G. "Financial Market Structure: A Longer View."
Federal Reserve Bank of New York. Annual Report, February, 1987.
MAYER, M. The Money Bazaars, 1984.
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