Financial Intermediation and the Functioning of Capital Markets (Classic Reprint)

Book excerpt: Excerpt from Financial Intermediation and the Functioning of Capital Markets This paper seeks to redress a seeming imbalance. In recent years a number of positive theories of capital market equilibrium have obtained wide currency, but these models seem, at first glance, to say very little about financial intermediaries: In particular, why do they exist, and what is their function in the capital market? Inasmuch as such firms as banks, thrift institutions, and insurance companies and organized securities markets are observed to be important actors in the capital markets, an attempt is made here to analyze their role and function in the context of capital market theory. We show that intermediation is a service performed both by marketable secondary securi ties and by claims issued by institutional intermediaries. The existing structure of the provision of these intermediary services follows directly from the interaction of demand and supply, demand viewed as the aggrega tion of individual demands for security attributes in a portfolio context and supply being a function of the structure of the costs of transacting. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.