Economists group commercial banks, savings and loan associations, credit unions, mutual funds, mutual savings banks, insurance companies, pension funds, and finance companies together under the heading financial intermediaries. What function do financial intermediaries perform?(a) act as middlemen, borrowing funds from those who have saved and lending these funds to others. (b) produce nothing of value and are therefore a drain on society’s resources. (c) help promote a more efficient and dynamic economy. (d) do all of the above. (e) do only (a) and (c) of the above.

Financial intermediaries are institutions that offer a service for individuals or institutions who want to save or borrow money. They help to promote a more efficient economy.

We take some things for granted, but try to imagine if no banks existed.

For instance, you need to borrow $200,000 to buy a new house, but none of your friends or family can lend to you. If banks (or other types of financial institutions) didn´t exist, you would have to search your neighborhood or workplace for someone willing to lend you the money. It is possible for you to find a private lender, but it would be time consuming and very inefficient. Instead the easiest way is to go to a bank and ask for a loan.

The same happens if you have saved some extra money. If banks didn´t exist you would have to hide it in your house or other places, or lend it to someone you knew that needed that money and is willing to pay it back with interest. Banks make saving money much more easy and safer.