Financial Intermediation

There are many roles that financial institutions are responsible for. One role is financial intermediation. Financial intermediation is the movement of resources between two parties, such as a business and individual (Cecchetti, 1999). Financial intermediaries borrow from others in order to lend to companies or individuals that need a source for investing (Gorton & Winton, 2002).

The services that financial intermediaries provide include:performing security related orders, managing securities portfolios, marketing securities through the publi, registering and depositing securities, granting credit to investors, and consulting with businesses and individuals about secrities investing ("What Is Financial Intermediation?," n.d.).

As you can see there are many roles that intermediaries take on in order to assure that business investments are done properly. It would be impossible to do business without financial intermediation. Financial intermediaries are essential in everyday business because they "overcome market frictions and lower the cost to society of transferring information of wealth between households and firms" (Becsi & Wang, 1997).

Financial intermediation is essential to business because there are frictions that take place: technological and incentive frictions (Becsi & Wang, 1997). Technological frictions would take place if it were not for intermediation. Intermediation involves the transfer of funds from one party to another. With this transfer, there may also be a need to transform the money into another form, such as from savings to bonds (Becsi & Wang, 1997). With financial intermediaries in place the technology friction is erased because they repackage wealth and transfer capital and information more efficiently (Becsi & Wang, 1997). Incentive frictions occur when a firm does not want to disclose certain information that might affect investment decisions. "Financial intermediaries can help reduce problems associated with asymmetric information or moral hazard by offering financial contracts that are not available in markets and providing economies of scale in monitoring and control" (Becsi & Wang, 1997).

In response to the scrutinizing of Strident marks, there are many ways they should handle the issue. First Strident Marks should assure its consumers that they will not be any different now that they are publicly traded company. The investments are safe and more efficient due to the IPO. Strident Marks and its counterparts will gain from the IPO and increased usage of intermediary sources. References

Becsi, Z. & Wang, P. (1997, 4^th Quarter). Financial development and growth. Economic Review, 82(4), 46. Retrieved March 5, 2007, from Business Source Elite.

Cecchetti, S.G. (1999, May). The future of financial intermediation and regulation: An overview. Current Issues in Economics & Finance, 5(8), 1. Retrieved March 5, 2007, from Business Source Elite.

Gorton, G. & Winton, A. (2002, March 1). Financial intermediation. Retrieved March 5, 2007, from University of Pennsylvania Web site: http://fic.wharton.upenn.edu/fic/papers/02/0228.pdf

What is financial intermediation? (n.d.). Retrieved March 5, 2007, from http://www.financialintermediation.net/