Sample Essay
Optimal loan contracts are usually devised to provide the consumers and the borrowers with the most attractive loan package possible. The purpose of the optimal loan contract is to maximize the convenience and the favorability of the package for the borrower. As a result the incentives that are provided in the optimal loan contract like the repayment facilitates, consolidation of the loan and the low interest rates pertain to tools that are specifically devised to attract customers and make the loan a feasible option for the borrower. Moreover optimal loans also reduce the chance of the borrower defaulting on the loan.
Since 1913 when the Federal Reserve System was adopted, the system has been pretty much the same. However evolution in the banking system inAmericahas been taking place in term of the monitoring, controlling and management of the monetary and other transactions the economy. The electronic methods for bills presentment transfer of funds, and management of money and records is being adopted by the Federal Reserve System. Furthermore we have been able to establish the role of financial intermediaries in the American Banking system. The importance of the intermediaries in terms of the economy have been provided pertaining to the justification of the financial intermediaries, the effect of asymmetric information on the intermediaries as a result on the economy as well as the specific effects of moral hazard and adverse selection that is conducted by the participants in the market.
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