Article5 : Danielle Douglas, “Banks, Credit Unions Post Strong Second-Quarter Profits,” Washingtonpost.com, August 29, 2013. Available at

http://www.washingtonpost.com/business/economy/banks-credit-unions-post-strong-second-quarter-profits/2013/08/29/5d40f8a2-10d6-11e3-85b6-d27422650fd5_story.html

Banks and other financial intermediaries serve a very important function in the financial system. This week’s article reports rising profits for U.S. banks and credit unions and identifies some

factors responsible for their stronger performance. Class discussion can be related to the overview of the financial system in Chapter 2, with special emphasis on the types of financial

intermediaries, their activities, and their role in the financial system.
Questions for Discussion
1.    Define the following terms and phrases used in or related to this article:
a.    direct finance
b.    indirect finance
c.    adverse selection
d.    moral hazard
e.    financial intermediary
f.    Federal Deposit Insurance Corporation
g.    financial crisis
2.    What is the main economic function of the financial system?
a.    How does a well-functioning financial system improve people’s economic well-being?
b.    How does a financial crisis impair the operation of the financial system and harm individuals, households, businesses, and governments?
3.    Why are financial intermediaries necessary for the financial system to operate efficiently?
4.    How are banks and credit unions similar and how do they differ in performing their roles as financial intermediaries?
a.    Why are bank and credit union profits on the rise?
b.    Why has loan growth been higher at credit unions than at banks?
c.    What factors continue to constrain bank profits in particular?