TY  - JOUR
AU  - Gorton,Gary
AU  - Winton,Andrew
TI  - Financial Intermediation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8928
PY  - 2002
Y2  - May 2002
UR  - http://www.nber.org/papers/w8928
L1  - http://www.nber.org/papers/w8928.pdf
N1  - Author contact info:
Gary B. Gorton
Yale School of Management
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
Fax: 203/432-8931
E-Mail: Gary.Gorton@yale.edu

Andrew Winton
Carlson School of Management
Finance Department
University of Minnesota
3-275 CarlS Mgmt
321 19th Avenue S
Minneapolis, MN 55455
Tel: 612/624-0589
Fax: 612/626-1335
E-Mail: awinton@csom.umn.edu
AB  - The savings/investment process in capitalist economies is organized around financial intermediation, making them a central institution of economic growth.  Financial intermediaries are firms that borrow from consumer/savers and lend to companies that need resources for investment.  In contrast, in capital markets investors contract directly with firms, creating marketable securities.  The prices of these securities are observable, while financial intermediaries are opaque.  Why do financial intermediaries exist?  What are their roles?  Are they inherently unstable?  Must the government regulate them?  Why is financial intermediation so pervasive?  How is it changing?  In this paper we survey the last fifteen years' of theoretical and empirical research on financial intermediation.  We focus on the role of bank-like intermediaries in the savings-investment process.  We also investigate the literature on bank instability and the role of the government.
ER  -