There are bank (monetary) intermediaries and nonbank (nonmonetary) intermediaries. Their income statements report high ratios of income from interest and dividends to total income and of expense for interest and dividends to total expense. The intermediaries may be identified by their balance sheets, which show a high proportion of financial to tangible assets and of indirect debt to equity. They intermediate between the sources of funds that flow to them and the ultimate users of these funds. Their lending directs the flow of funds to expenditure by borrowers on consumption, tangible investment, or primary debt. Their issues attract funds from alternative expenditures by nonfinancial spending units on consumption, tangible investment, or primary debt. They provide added liquidity to the market by removing any price inefficiencies.Financial intermediaries issue (indirect) debt of their own to buy the (primary) debt of others.
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