lend – давать взаймы, ссужать
liquid – ликвидный
overnight – на ночь
pressure – давление
principal – главный, принципиальный
profitability – прибыльность
realize – реализовывать
reserve – резерв; резервировать; резервный
Senate – сенат
term – срок
board of governors – совет управляющих
policy-making – определяющий политику
key role – ключевая роль
vice chairman – вице-председатель
reserve funds – резервные фонды
short-term interest rates – краткосрочные процентные ставки
make loan – давать ссуду, заем
profit margin – валовая прибыль, банковская маржа
attract deposits – привлекать депозиты
congressionally granted authority – данное конгрессом право
balance sheet – баланс
relative to – относительно ( чего-либо )
push down – толкать вниз
discount rate – дисконтная ставка, ставка рефинансирования
liquid reserves – ликвидные резервы
on hand – на руках
reserve requirement – требования по резервным запасам
Exercise 1
Answer the questions:
1. Since when has the Fed been the central bank of the United States?
2. What is the main purpose of the Fed?
3. What role does the American Senate play in the work of the Fed?
4. Why are the terms of the FED governors so long?
5. What does the FED do in order to regulate the amount of the nation\'s money supply?
6. What is the profit margin of the bank?
7. How does FED create money?
8. How can the interest rate be pushed down?
9. What is the discount rate?
10. How are the commercial banks\' liquid reserves regulated?
1A banker was about to get married. He went to the jewelers to get a wedding ring for his fiancee. The jeweler told him that he can have the inside of the ring engraved with the name of his fiancee for an additional $20.
He said, «But that will reduce the resale value!» The jeweler was aghast. He said, «How can you say such a thing. You are a butcher!» «No,» replied the banker, «I am an banker».
2A banker is someone who knows the price of everything and the value of nothing.
3One of life\'s disappointments is discovering that the man who writes the bank\'s ads is not the one who makes the loans.
Слова и выражения:additional – дополнительный
butcher – мясник
disappointment – разочарование
discover – обнаруживать
engrave – гравировать
fiancee – невеста
inside – внутренняя поверхность
jeweler – ювелир
resale – перепродажа
get married – жениться ( выходить замуж )
wedding ring – обручальное ( свадебное ) кольцо
bank\'s ad – банковская рекламаBank Runs
A run on a bank occurs when a large number of depositors, fearing that their bank will be unable to repay their deposits in full and on time, try to withdraw their funds immediately. This creates a problem because banks keep only a small fraction of deposits on hand in cash; they lend out the majority of deposits to borrowers or use the funds to purchase other interest-bearing assets like government securities. When a run comes, a bank must quickly increase its liquidity to meet depositors\' demands. It does so primarily by selling assets, frequently at fire-sale prices. Losses on these sales can make the bank insolvent.
The danger of bank runs has been overstated. For one thing, a bank run is unlikely to cause insolvency. Suppose that depositors, worried about their bank\'s solvency, start a run and switch their deposits to other banks. If their concerns about the bank\'s solvency are unjustified, other banks in the same market area would generally gain from recycling funds they receive back to the bank experiencing the run. They would do this by making loans to the bank or by purchasing the bank\'s assets at non-fire-sale prices. Thus, a run is highly unlikely to make a solvent bank insolvent.
Of course, if the depositors\' fears are justified and the bank is economically insolvent, other banks would be unlikely to throw good money after bad by recycling their funds to the insolvent bank. As a result the bank could not replenish its liquidity and would be forced into default. But the run would not have caused the insolvency; the insolvency had already been incurred, but not fully recognized. The recognition of the existing insolvency caused the run.
Слова и выражения:
bear – нести, носить
concerns – озабоченность
default – дефолт, невыполнение обязательств
incur – потерпеть (убытки), принять на себя (расходы)
insolvent – несостоятельный
justified – оправданный
liquidity – ликвидность
occur – случаться, происходить
overstate – преувеличивать
recognition – узнавание, признание
recognize – узнавать, признавать
repay – выплачивать
replenish – пополнять (запасы)
solvency – состоятельность
switch – переключаться
unjustified – неоправданный
unlikely – маловероятно
withdraw – снимать деньги со счета в банке
run on a bank – «натиск» на банк (наплыв депозиторов с целью изъять депозиты)
repay in full – выплачивать полностью
interest-bearing assets – активы, по которым выплачиваются проценты
meet demand – удовлетворять требования
fire-sale price – «горящая» цена ( заниженная цена на «горящие» активы )
throw good money after bad – рисковать хорошими деньгами ради плохих
Exercise 2
Answer the questions:
1. When does a run on a bank occur?
2. Why does a run on a bank create problems for the bank?
3. What should a bank do if it is run on by depositors?
4. What can happen to a bank if it sells its assets at a fire-sale price?
5. Why are the dangers of bank runs usually unjustified?
6. How do banks cooperate in case a run on one bank occurs?
7. Why would banks not help another bank in case of a bank run?
8. What usually causes the bank run?
1A guy walks into a bank and says to the teller at the window, «I want to open a helluva checking account.»
To which the lady replied, «I beg your pardon, what did you say?»
«Listen up dammit, I said I want to open a helluva checking account right now.»
«Sir, I\'m sorry but we do not tolerate that kind of language in this bank!»
The teller left the window and went over to the bank manager and told him about her situation. They both returned and the manager asked, «What seems to be the problem here?»
«There\'s no damn problem,» the man said, «I just won 50 million in the lottery and I want to open a helluva checking account in this damn bank!»
«I see, sir,» the manager said, «and this damn old gal is giving you a hard time?»
2If you owe the bank $100, that\'s your problem. If you owe the bank $100 million, that\'s the bank\'s problem.
Слова и выражения:helluva ( от hell of a ) – чертов, проклятый
language – язык
lottery – лотерея
owe – быть должным
teller – кассир в банке
tolerate – выдерживать
checking account – чековый счет, текущий счет в банке
I beg your pardon – прошу меня извинить
no damn problem – никакой чертовой проблемы
damn bank – чертов банк
old gal – старушка
a hard time – трудные временаCapital Flight
Capital flight is the widespread currency speculation, leading to cross-border movements of private funds that are large enough to affect national financial markets. The distinction between «flight» and normal capital outflows is a matter of degree, much like the difference between a «bank run» and normal withdrawals. The most common cause of capital flight is an anticipated devaluation of the home currency. No one wants to be caught holding assets that lose 20 or 30 percent of their value overnight, so everyone tries to buy gold or foreign currency. These episodes are usually short-lived, as the so-called «hot money» returns after the devaluation.
Capital flight is usually a symptom rather than a cause of financial crisis. Occasionally, however, rumors of a devaluation can trigger capital outflows. Expectations of devaluation can become self-fulfilling, as depletion of the central bank\'s reserves force it to devalue. In these cases capital flight becomes a source of financial instability, much as withdrawals by worried depositors can cause an otherwise sound bank to fail.
Not surprisingly, episodes of capital flight are most frequent when exchange rates are unstable. In the twenties and thirties the demise of the gold standard led to numerous speculative attacks on the French franc and German mark. When the Bretton Woods system of fixed exchange rates began to break apart in the late sixties, the United States tried to defend the dollar with capital controls and by refusing foreign banks\' demands to convert dollars to gold. (U.S. citizens were already barred from owning gold.) After exchange rates were set free in 1973, the U.S. dollar replaced gold as the flight vehicle of choice. Convertible to most currencies, dollars also earn interest in convenient offshore or Eurodollar accounts.
Since the Third World debt crisis in the eighties, the term «capital flight» has been applied more broadly to capital outflows from residents of developing countries. One reason that capital fled the debtor countries is that domestic investors felt their government would give precedence to its foreign rather than its domestic debt obligations. This situation contrasts with the earlier experience with direct foreign investment, when domestically owned assets were considered safe from expropriation while foreign-owned assets were at risk.