Even though the Federal Reserve Act requires that banks keep a certain percentage of their money in reserve, if everyone came to withdraw their money at the same time, there wouldn't be enough. In the event of a bank failure, your money is protected as long as the bank is insured by the Federal Deposit Insurance Corporation （FDIC）. The key to the success of banking, however, still lies in the confidence that consumers have in the bank's ability to grow and protect their money. Because banks rely so heavily on consumer trust, and trust depends on the perception of integrity, the banking industry is highly regulated by the government.
Types of Banks
There are several types of banking institutions, and initially they were quite distinct. Commercial banks were originally set up to provide services for businesses. Now, most commercial banks offer accounts to everyone. Savings banks, savings and loans associations, cooperative banks and credit unions are actually classified as thrift5 institutions. Each originally concentrated on meeting specific needs of people who were not covered by commercial banks. Savings banks were originally founded in order to provide a place for lower-income workers to save their money. Savings and loan associations and cooperative banks were established during the 1800s to make it possible for factory workers and other lower-income workers to buy homes. Credit unions were usually started by people who shared a common bond, like working at the same company （usually a factory） or living in the same community. The credit union's main function was to provide emergency loans for people who couldn't get loans from traditional lenders. These loans might be for things like medical costs or home repairs.
Now, even though there is still a differentiation between banks and thrifts, they offer many of the same services. Commercial banks can offer car loans, thrift institutions can make commercial loans, and credit unions offer mortgages！
How Do Banks Make Money?
Banks are just like other businesses. Their product just happens to be money. Other businesses sell widgets or services; banks sell money - in the form of loans, certificates of deposit （CDs） and other financial products. They make money on the interest they charge on loans because that interest is higher than the interest they pay on depositors' accounts.
The interest rate a bank charges its borrowers depends on both the number of people who want to borrow and the amount of money the bank has available to lend. As we mentioned in the previous section, the amount available to lend also depends upon the reserve requirement the Federal Reserve Board has set. At the same time, it may also be affected by the funds rate, which is the interest rate that banks charge each other for short-term loans to meet their reserve requirements.
Loaning money is also inherently risky. A bank never really knows if it'll get that money back. Therefore, the riskier the loan is, the higher the interest rate the bank charges. While paying interest may not seem to be a great financial move in some respects, it really is a small price to pay for using someone else's money. Imagine having to save all of the money you needed in order to buy a house. We wouldn't be able to buy houses until we retired！ Banks also charge fees for services like checking, ATM access and overdraft protection. Loans have their own set of fees that go along with them. Investments and securities could also bring income for banks.
New Words and Expressions
1. coin and banknote硬幣和紙幣
2. cheque支票
3. I.O.U. （I owe you）借據
4. credit cards and gold信用卡和黃金
5. the gold standard金本位（製）
6. inflation-prone currencies具有通脹傾向的貨幣
7. monetary transactions貨幣性交易
8. barter易貨貿易
9. medium of exchange交換媒介
10. standard of value價值尺度
11. store of wealth財富貯藏
12. commodity money商品貨幣
13. fiat money不能兌現的紙幣
14. reserve requirement準備金要求
15. a run on the bank銀行擠兌現象
16. Federal Deposit Insurance Corporation聯邦存款保險公司
17. Federal Reserve Board聯邦儲備委員會
18. interest rate利率
19. funds rate（聯邦）資金利率
20. fee服務費
21. ATM自動櫃員機
22. overdraft透支
23. securities有價證券
Notes
1. banknotes. A piece of printed paper that has a particular value as money.
2. cheque. A printed form, used instead of money, to make payments from your bank account.
3. fiat money. Money that a government has declared to be legal tender, despite the fact that it has no intrinsic value and is not backed by reserves.
4. trust. A fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary.
5. thrift. The careful use of money, esp. by avoiding waste.
Exercises
Ⅰ. Answer the following questions in English:
1. What sorts of things have been used as money at different times in different places? What are the main characteristics of them?
2. What functions does money serve?
3. How does the system of barter operate? What are the main disadvantages of the barter system?
4. What are two types of money?
5. What is a modern bank?
6. How do banks create money?
7. What will happen if you go to the bank and demand your money?
8. What will happen if everyone goes to the bank at the same time and demands their money?
9. What kinds of factors affect the interest rate a bank charges its borrowers?
10. How do banks make money?
Ⅱ. Fill in each blank with an appropriate word or expression:
1. If a community, by luck or by design, can find one commodity that everyone accepts whatever is sold, traders can much time, disappointment and sheer aggravation.
2. the sale of one good from the purchase of another requires something acceptable to all parties in the transaction. Corn this role, a role that clearly goes beyond its usual function as food.
3. We call corn because corn is accepted in exchange by all buyers and sellers, whether or not they want corn for its own uses.
4. A medium of exchange is anything that is generally accepted in return for goods and services sold. Corn is no longer an end but a to an end. The end may be shoes, meat and pots, whatever. It is accepted because it can be readily exchanged for other goods. Corn can purchase whatever is desired whenever it is desired.
5. Because in this example corn both is a commodity and money, we call corn commodity money. The earliest money was commodity money.
6. Money is a of exchange universally acceptable for goods and services. Originally the medium was the commodity most common in the trade of the time and place.
Ⅲ. Translate the following sentences into English:
1. 貨幣主要有兩種形式: 商品貨幣和紙幣。最初的貨幣形式是商品貨幣。
2. 貨幣主要有三個功能: 交易媒介，價值尺度和財富貯藏。
3. 銀行的傳統業務是吸收存款，發放貸款, 銀行的利潤主要來源於存貸款的利差、手續費收入和投資收益等。
4. 利率是資金的價格，它受資金市場供求的影響。
5. 聯邦資金利率是銀行為了滿足法定存款準備金的要求，相互之間提供短期貸款而收取的利率。
6. 銀行通過發放貸款來創造貨幣。銀行可以發放貸款的數量直接受中央銀行的存款準備金要求的影響。
Ⅳ. Translate the following passages into Chinese:
1. The U.S. is unique among the nations in terms of the number of commercial banks in operation, 7660 as of September 2004. This number has been steadily decreasing due to mergers, but is still about five times greater than that in the UK, the nation with the second largest number of banks.
2. Most of the assets of U.S. banks are concentrated in the larger banks. The ten largest now hold almost half the total of bank assets.
3. The nation's largest banks are often referred to as money market banks or money center banks. In addition to the traditional markets, to be a money center bank today means to have a global presence as well as heavy involvement in wholesale banking with clients comprising many retail banks and large corporations. Citibank, JP Morgan Chase, and Bank of America fit this description.
4. Money is anything that is widely used for making payments and accounting for debts and credits.
5. Savings banks, savings and loans associations, cooperative banks and credit unions are actually classified as thrift institutions. Each originally concentrated on meeting specific needs of people who were not covered by commercial banks.
6. The future for money in the global economy will enable quicker and more seamless transactions.
Reading Materials
Deposit Insurance and Bank Failures
A Brief History of Deposit Insurance
After a rash of bank failures in the early 1930s, Federal deposit insurance was enacted by Congress, but over strong opposition. The opponents argued that it would encourage bad banking and eventually become a burden to the taxpayer. But for the first time in the history of American banking, there was a lengthy period without bank runs or banking panics, and very few banks failed. That all began to change in the 1970s.It reached a crisis in the 1980s when bank failures, though less numerous, far exceeded the total assets （in constant dollars） of failed banks in the 1930s.
The S&L crisis of the 1980s wiped out the Federal Savings and Loan Insurance Corporation （FSLIC）. As a result, Congress revised the system. In 1989 deposit insurance was consolidated under the Federal Deposit Insurance Corporation （FDIC）. Two funds were set up, the Bank Insurance Fund （BIF） which covers commercial banks and savings banks, and the Savings Association Insurance Fund （SAIF） which insures deposits at S&Ls. The focus here is on deposit insurance as it relates to banks.
Insure banks pay a premium on all their deposits, even those deposits that are not covered by insurance. For many years, premium income exceeded the cost of failures. But as the size of bank failures increased, the BIF went into the red in 1991. Instead of being declared insolvent, however, its losses were covered with loans from the Treasury, as authorized by Congress. In 1992 the fund staged a comeback. With increased premiums and a sharp improvement in bank profitability due to a drop in the interest rates, the BIF repaid its loans and was well in the black again by mid-1993.