This volume brings together some of the most important articles on the topic of financial intermediaries. Financial Intermediaries puts recent developments into an appropriate historical setting, with seminal works by Edgeworth, Arrow, Gurley, Shaw, Baumol, Tobin and Stigler combined with more recent ones by Fischer, Black, Weiss and Stiglitz.

1. Philippon, T. and A. Reshef (2013), ‘An International Look at the Growth of Modern Finance’, Journal of Economic Perspectives, 27 (2), 73–96. 2. Greenwood, R. and D. Scharfstein (2013), ‘The Growth of Finance’, Journal of Economic Perspectives, 27 (2), 3–28. 3. Cetorelli, N., B.H. Mandel and L. Mollineaux (2012), ‘The Evolution of Banks and Financial Intermediation: Framing the Analysis’, Federal Reserve Bank of New York Economic Policy Review, 18 (2), 21–34. 4. Asmundson, I. (2011), ‘What Are Financial Services?’, Finance & Development, 48 (1), 46–7. 5. Carter, R.L. (1979), Reinsurance, Dordrecht: Kluwer Publishing. 6. Lewis, M.K. and K.T. Davis (1987), Domestic and International Banking, Oxford: Philip Allan. Reprinted Cambridge, Mass: MIT Press, 1993. 7. Lewis, M.K. (1990), ‘Banking as Insurance’, in E.P.M. Gardener (ed.), The Future of Financial Systems and Services, London: Macmillan, 225–42. 8. Gurley, J.G. and E.S. Shaw (1956), ‘Financial Intermediaries and the Saving-Investment Process’, Journal of Finance, 11, 257–76. Reprinted in M.K. Lewis (ed.), Financial Intermediaries. The International Library of Critical Writings in Economics 43, Aldershot, UK and Brookfield, VT, USA: Edward Elgar, 1995. 9. Tobin, J. (1963), ‘Commercial Banks as Creators of “Money”’, Banking and Monetary Studies, ed. D. Carson for the Comptroller of the Currency, Homewood, Illinois: R.D. Irwin, 408–19. Reprinted in M.K. Lewis (ed.), Financial Intermediaries. The International Library of Critical Writings in Economics, 43, Aldershot, UK and Brookfield, VT, USA: Edward Elgar, 1995. 10. International Monetary Fund (2014), ‘Global Financial Stability Report’, https://www.imf.org/external/pubs/ft/gfsr/, accessed 13 October 2014. 11. Cochrane, J.H. (2013), ‘Finance: Function Matters, Not Size’, Journal of Economic Perspectives, 27 (2), 29–49. 12. Stutchbury, O.P. (1964), The Management of Unit Trusts, Nottingham: Thomas Skinner & Co. 13. Fama, E.F and K.R. French (2010), ‘Luck versus Skill in the Cross-Section of Mutual Fund Returns’, Journal of Finance, 65 (4), 1915–47. 14. Gennaioli, N., A. Schleifer and R. Vishny (2012), ‘Money Doctors’, NBER Working Paper 18174, Cambridge, MA: National Bureau of Economic Research. 15. French, K.R. (2008), ‘Presidential Address: The Cost of Active Investing’, Journal of Finance, 63 (4), 1537–73. 16. Baumol, W.J. (1965), ‘The Specialist: Operator of the Automatic Mechanism’, in W.J. Baumol, The Stock Market and Economic Efficiency, New York: Fordham University Press, 9–34. Reprinted in M.K. Lewis (ed.), Financial Intermediaries. The International Library of Critical Writings in Economics, 43, Aldershot, UK and Brookfield, VT, USA: Edward Elgar, 1995. 17. Demsetz, H. (1968), ‘The Cost of Transacting’, Quarterly Journal of Economics, LXXXII (1), February, 33–53. Reprinted in M.K. Lewis (ed.), Financial Intermediaries. The International Library of Critical Writings in Economics, 43, Aldershot, UK and Brookfield, VT, USA: Edward Elgar, 1995. 18. Kirilenko, A.A. and A.W. Lo (2013), ‘Moore’s Law versus Murphy’s Law: Algorithmic Trading and Its Discontents’, Journal of Economic Perspectives, 27 (2), 51–72. 19. Hendershott, T., C.M. Jones and A.J. Menkveld (2011), ‘Does Algorithmic Trading Improve Liquidity?’, Journal of Finance, 66 (1), 1–33. 20. Tabb, L. (2012), ‘Written Testimony to the United States Senate Committee on Banking, Housing and Urban Affairs by Larry Tabb, CEO, TABB Group’, 30 September, http://www.banking.senate.gov/public/index.cfm?FuseAction=Hearings.Testimony&Hearing_ID=f8a5cef9-291d-4dd3-ad3-10b55c86d23e&Witness_ID=f52000faa2-1cfe-48a5-b373-60bde009d3a3, accessed 20 January 2013. 21. Kirilenko, A.A., A.S. Kyle, M. Samadi and T. Tuzun (2011), ‘The Flash Crash: The Impact of High Frequency Trading on an Electronic Market’, http://papers.ssrn.comn/so13/papers.cfm?abstract_id=1686004, accessed 5 April 2013. 22. Vigna, P. and T. Lauricella (2012), ‘Sawtooth Trading Hits Coke, IBM, McDonald’s, and Apple Shares’, Wall Street Journal, 19 July, http://blogs.wsj.com/marketbeat/2012/07/19/sawtooth-trading-hits-coke-ibm-mcdonalds-and-apple-shares/, accessed 25 July 2012. 23. Khandani, A.E. and A.W. Lo (2007), ‘What Happened to the Quants in August 2007?’, Journal of Investment Management, 5 (4), 5–54. 24. Lehmann, B.N. (1990), ‘Fads, Martingales, and Market Efficiency’, Quarterly Journal of Economics, 105 (1), 1–28. 25. Lo, A. and C. MacKinlay (1990), ‘When Are Contrarian Profits Due to Stock Market Over-reaction?’, Review of Financial Studies, 3 (2), 175–205. 26. Goldman Sachs Asset Management (2007), ‘The Quant Liquidity Crunch’, Goldman Sachs Global Quantitative Equity Group, August. Proprietary document for Goldman Sachs clients; not available to the general public. 27. Rothman, M.S. (2007a), ‘Turbulent Times in Quant Land’, US Equity Quantitative Strategies, 9 August, Lehman Brothers Equity Research, http://dealbreaker.com/_old/images/pdrf/quant.pdf, accessed 19 August 2007. 28. Rothman, M.S. (2007b), ‘View from QuantLand: Where Do We Go Now?’, US Equity Quantitative Strategies, Lehman Brothers Research. Proprietary document for Lehman clients only; not available to the general public. 29. Rothman, M.S. (2007c), ‘Rebalance of Large Cap Quant Portfolio’, US Equity Quantitative Strategies, Lehman Brothers Research. Proprietary document for Lehman clients only; not available to the general public. 30. Edgeworth, F.Y. (1888), ‘The Mathematical Theory of Banking’, Journal of the Royal Statistical Society, LI, 113–27. Reprinted in M.K. Lewis (ed.), Financial Intermediaries. The International Library of Critical Writings in Economics, 43, Aldershot, UK and Brookfield, VT, USA: Edward Elgar, 1995. 31. Haubrich, J.G. and R.G. King (1984), ‘Banking and Insurance’, Working Paper 1312, National Bureau of Economic Research. 32. Orr, D. and W.G. Mellon (1961), ‘Stochastic Reserve Losses and Expansion of Bank Credit’, American Economic Review, LI (4), 614–23. Reprinted in M.K. Lewis (ed.), Financial Intermediaries. The International Library of Critical Writings in Economics, 43, Aldershot, UK and Brookfield, VT, USA: Edward Elgar, 1995. 33. Friedman, M. (1969), ‘The Optimal Quantity of Money’, in M. Friedman, The Optimal Quantity of Money and Other Essays, Chicago: Aldine Publishing Co., 1–50. 34. Keister, T. and J.J. McAndrews (2009), ‘Why Are Banks Holding So Many Excess Reserves?’, Current Issues in Economics and Finance, Federal Reserve Bank of New York, 15 (8), 1–11. 35. Iley, Richard A. and M.K. Lewis (2013), Global Finance After the Crisis: The United States, China and the New World Order, Cheltenham, UK and Northampton, MA, USA: Edward Elgar. 36. Bank for International Settlements (2010), ‘The Future of the Financial Sector’, BIS 80th Annual Report, Basel, Switzerland: Bank for International Settlements, 74–88. 37. Gurley, J.G. and E.S. Shaw (1960), Money in the Theory of Finance, Washington, DC: The Brookings Institution, 1995. 38. Keynes, J.M. (1936), General Theory of Employment, Interest and Money, London: Macmillan. 39. Leland, H.E. and D.H. Pyle (1977), ‘Information Asymmetries, Financial Structure and Financial Intermediation’, Journal of Finance, 32, 371–87. Reprinted in M.K. Lewis (ed.), Financial Intermediaries. The International Library of Critical Writings in Economics, 43, Aldershot, UK and Brookfield, VT, USA: Edward Elgar, 1995. 40. Diamond, D. (1984), ‘Financial Intermediation and Delegated Monitoring’, Review of Economic Studies, 51 (166), 393–414. Reprinted in M.K. Lewis (ed.), Financial Intermediaries. The International Library of Critical Writings in Economics, 43, Aldershot, UK and Brookfield, VT, USA: Edward Elgar, 1995. 41. Fama, E.F. (1985), ‘What’s Different About Banks?’, Journal of Monetary Economics, 15, 23–39. Reprinted in M.K. Lewis (ed.), Financial Intermediaries. The International Library of Critical Writings in Economics, 43, Aldershot, UK and Brookfield, VT, USA: Edward Elgar, 1995. 42. Arrow, K.J. (1964), ‘The Role of Securities in the Optimal Allocation of Risk-Bearing’, Review of Economic Studies, 31, 91–6. 43. Arrow, K.J. (1974), ‘Insurance, Risk and Resource Allocation’, in K.J. Arrow, Essays in the Theory of Risk-Bearing, Amsterdam: North Holland, 134–43. Reprinted in M.K. Lewis (ed.), Financial Intermediaries. The International Library of Critical Writings in Economics, 43, Aldershot, UK and Brookfield, VT, USA: Edward Elgar, 1995. 44. Swary, I. and G.F. Udell (1985), ‘The Role of Collateral in Commercial Lending’, Working Paper No. 359, Salomon Brothers Center for the Study of Financial Institutions, New York University. 45. Dowd, K. (1992a), ‘Models of Banking Instability: A Partial Review of the Literature’, Journal of Economic Surveys, 6 (2), 107–32. Reprinted in M.K. Lewis (ed.), Financial Intermediaries. The International Library of Critical Writings in Economics, 43, Aldershot, UK and Brookfield, VT, USA: Edward Elgar, 1995. 46. Dowd, K. (1996), Competition and Finance. A Reinterpretation of Financial and Monetary Economics, London: Macmillan. 47. Modigliani, F. and M.H. Miller (1958), ‘The Cost of Capital, Corporation Finance and the Theory of Investment’, American Economic Review, 48, 261–97. 48. Flannery, M.J. (1985), ‘A Portfolio View of Loan Selection and Pricing’, in R. Aspinwall and R. Eisenbeis (eds), Handbook for Banking Strategy, Hoboken, NJ: John Wiley, 457–72. 49. Bernanke, B. and M. Gertler (1986), ‘Banking and General Equilibrium’, Discussion Paper No. 108, Woodrow Wilson School of Public and International Affairs, Princeton University. 50. Dowd, K. (1992b), ‘Optimal Financial Contracts’, Oxford Economic Papers, 44, October, 672–93. 51. Benink, H.A. and D.T. Llewellyn (1994), ‘Deregulation and Financial Fragility: A Case Study of the UK and Scandinavia’, in D.E. Fair and R.J. Raymond (eds), The Competitiveness of Financial Institutions and Centres in Europe, on behalf of the Société Universitaire Européenne de Recherches Financières, Dordrecht: Kluwer Academic Publishers, 443–63. 52. Lewis, M.K. (1994), 'Banking on Real Estate', in D.E. Fair and R. Raymond (eds), The Competitiveness of Financial Institutions and Centres in Europe, on behalf of the Société Universitaire Européenne de Recherches Financières, Dordrecht: Kluwer Academic Press, 47–71. 53. Lewis, M.K. (2000), 'The Next Property Cycle: A Survival Kit for Banks', in B. Green (ed.), Risk Behaviour and Risk Management in Business Life, Dordrecht: Kluwer Academic Publishers, 98–110. 54. Bentick, B.L. and M.K. Lewis (2004), ‘Real Estate Speculation as a Source of Banking and Currency Instability: Some Different Lessons from the Asian Crisis’, The Economics and Labour Relations Review, 14 (2), 256–75. 55. Lewis, M.K. (2009), ‘The Origins of the Sub-prime Crisis: Inappropriate Policies, Regulations, or Both?’, Accounting Forum, 33 (2), 114–26. 56. Calomiris, C.W. and C. Kahn (1989), ‘The Role of Demandable Debt in Structuring Optimal Banking Arrangements’, mimeo, Northwestern University. 57. Diamond, D. and P. Dybvig (1983), ‘Bank Runs, Deposit Insurance and Liquidity’, Journal of Political Economy, 91 (3), 401–19. Reprinted in M.K. Lewis (ed.), Financial Intermediaries. The International Library of Critical Writings in Economics, 43, Aldershot, UK and Brookfield, VT, USA: Edward Elgar, 1995. 58. Jacklin, C.H. (1987), ‘Demand Deposits, Trading Restrictions, and Risk Sharing’, in E.C. Prescott and N. Wallace (eds), Contractual Arrangements for Inter-temporal Trade, Minnesota Studies in Macroeconomics, vol. 1, Minneapolis: University of Minnesota Press, 26–47. 59. Wallace, N. (1988), ‘Another Attempt to Explain an Illiquid Banking System: The Diamond and Dybvig Model with Sequential Service Taken Seriously’, Federal Reserve Bank of Minneapolis Quarterly Review, Fall, 3–16. 60. Diamond, D. and P. Dybvig (1986), ‘Banking Theory, Deposit Insurance, and Bank Regulation’, Journal of Business, 59 (1), 55–68. Reprinted in M.K. Lewis (ed.), Financial Intermediaries. The International Library of Critical Writings in Economics, 43, Aldershot, UK and Brookfield, VT, USA: Edward Elgar, 1995. 61. White, L.J. (1989), ‘The Reform of Federal Deposit Insurance’, Journal of Economic Perspectives, 3 (4), 11–29. Reprinted in M.K. Lewis (ed.), Financial Intermediaries. The International Library of Critical Writings in Economics, 43, Aldershot, UK and Brookfield, VT, USA: Edward Elgar, 1995. 62. Litan, R. (2011), The World in Crisis: Insights from Six Shadow Financial Regulatory Committees From Around the World, Philadelphia, PA: FIC Press. 63. Gorton, G. and A. Merrick (2012), ‘Securitized Banking and the Run on Repo’, Journal of Financial Economics, 104 (3), 425–51. 64. King, M. (2010), ‘Banking: From Bagehot to Basel, and Back Again’, New York: Buttonwood Gathering, 25 October. 65. Ashcraft, A. and T. Schuermann (2008), ‘Understanding the Securitization of Subprime Mortgage Credit’, Foundations and Trends in Finance, 2 (3), 191–309. 66. Kacperczyk, M. and P. Schnabl (2010), ‘When Safe Proved Risky: Commercial Paper during the Financial Crisis of 2007–2009’, Journal of Economic Perspectives, 24 (1), 29–50. 67. Pozsar, A., T. Adrian, A. Ashcraft and H. Boesky (2010, revised 2012), ‘Shadow Banking’, Federal Reserve Bank of New York Staff Reports, no. 458. 68. Mollenkamp, C. and S. Ng (2007), ‘How Wall Street Wizards Conjured Up Sub-prime’s Hurricane Norma’, Wall Street Journal in The Australian, 28 December, 23. 69. Financial Stability Board (2013), ‘Policy Framework for Strengthening Oversight and Regulation of Shadow Banking Entities’, Consultative Document, Financial Stability Board, Basel, http://www.financialstabilityboard.org/publications/r_130929c.htm, accessed 20 January 2014. 70. Gorton, G. (2009), ‘The Subprime Panic’, European Financial Management, 15 (1), 10–46. 71. Nyberg, L., M. Persson and M.W. Johansson (2008), ‘The Financial Market Turmoil: Causes and Consequences’, Sveriges Riksbank Economic Review, 1, 38–48. 72. Goodhart, C.A.E. (2008), ‘Lessons from the Crisis for Financial Regulation: What We Need and What We Do Not Need’, Review, 78, Financial Markets Group Research Centre, 3–4. 73. Calomiris, C.W., R.A. Eisenbeis and R.E. Litan (2011), ‘US Financial Crisis in the US and Beyond’, in R. Litan (ed.), The World in Crisis: Insights from Six Shadow Financial Regulatory Committees from Around the World, Philadelphia, PA: FIC Press, 32–90. 74. Bord, V.M. and J.A.C. Santos (2012), ‘The Rise of the Originate-to-Distribute Model and the Role of Banks in Financial Intermediation’, Federal Reserve Bank of New York Economic Policy Review, 18 (2), 21–34. 75. Cetorelli, N. and S. Peristiani (2012), ‘The Role of Banks in Asset Securitization’, Federal Reserve Bank of New York Economic Policy Review, 18 (2), 47–63. 76. Mandel, B.H., D. Morgan and C. Wei (2012), ‘The Role of Bank Credit Enhancements in Securitization’, Federal Reserve Bank of New York Economic Policy Review, 18 (2), 35–46. 77. Uren, D. (2014), ‘Regulators Put Shadow Banking in the Spotlight’, The Australian, 17 November, 19. 78. Paletta, D. (2010), ‘Volcker Shoots from the Hip’, Wall Street Journal, 25–6 June, 31. 79. Poole, W. (2010), ‘Principles for Reform’, Finance and Development, 47 (2), 28–9. 80. Brennan, S., A. Haldane and V. Madouros (2010), ‘The Contribution of the Financial Sector: Miracle or Mirage?’, in The Future of Finance: The LSE Report, London School of Economics, http://www.bankofengland.co.uk/publications/speeches/2010/speech442. pdf, accessed 17 November 2010. 81. Zamil, S. Raihan (2009), ‘Too Big to Ignore’, Finance and Development, 46 (4), 41–4. 82. Friedman, M. (1960), A Program for Monetary Stability, New York: Fordham University Press. 83. Hart, A.G. (1935), ‘The Chicago Plan of Banking Reform’, Review of Economic Studies, 2, 104–16. 84. Davis, B. (2010), ‘Volcker Plan Gains Support as Rules are Rewritten’, Wall Street Journal in The Australian, 3 May, 35. 85. The Economist (2010), ‘Easy-Money Riders’, The Economist, 17 July, 70. 86. Kotlikoff, E.J. (2010), Jimmy Stewart is Dead: Ending the World’s Ongoing Financial Plague with Limited Purpose Banking, Hoboken, NJ: John Wiley & Sons. 87. Goodhart, C.A.E. (1995), The Central Bank and the Financial System, London: Macmillan. 88. Bradley, C., S. Burhouse, H. Gratton and R.A. Miller (2009), ‘Federal Reserve Board Academic Consultants Meeting on Non-traditional Financial Services, 16 April 2008, FDIC Quarterly, 3 (1), http://fdic.gov/bank/analytical/quarter/;2009_vol3_1/AltFinServicesprimer.html, accessed 30 July 2012. 89. Benston, G.J. (1965), ‘Branch Banking and Economies of Scale’, National Banking Review, 2, 507–49. 90. Benston, G.J. (1968), ‘Are Larger Banks More Efficient?’, The Banker, 118, 605, 607, 609, 611. Reprinted in M.K. Lewis (ed.), Financial Intermediaries. The International Library of Critical Writings in Economics, 43, Aldershot, UK and Brookfield, VT, USA: Edward Elgar, 1995. 91. Humphrey, D. (1987), ‘Cost Dispersion and the Measurement of Economies in Banking’, Federal Reserve Bank of Richmond Economic Review, 73 (May/June), 24–38. 92. Humphrey, D.B. (1990), ‘Why Do Estimates of Bank Scale Economies Differ?’, Federal Reserve Bank of Richmond Economic Review, 76 (5), 38–50. Reprinted in M.K. Lewis (ed.), Financial Intermediaries. The International Library of Critical Writings in Economics, 43, Aldershot, UK and Brookfield, VT, USA: Edward Elgar, 1995. 93. Avraham, D., P. Selvaggi and J. Vickery (2012), ‘A Structural View of US Bank Holding Companies’, Federal Reserve Bank of New York Economic Policy Review, 18 (2), 65–81. 94. Copeland, A. (2012), ‘Evolution and Heterogeneity among Larger Bank Holding Companies: 1994 to 2010’, Federal Reserve Bank of New York Economic Policy Review, 18 (2), 83–93. 95. Ross, S. (1973), ‘The Economic Theory of Agency: The Principal’s Problem’, American Economic Review, 63 (2), 134–9. 96. Mirrlees, J. (1974), ‘Notes on Welfare Economies, Information, and Uncertainty’, in M.S. Balch, D.L. McFadden and S.Y. Wu (eds), Contributions to Economic Analysis, Amsterdam: North-Holland, 243–58. 97. Mirrlees, J. (1976), ‘The Optimal Structure of Incentives and Authority within an Organisation’, Bell Journal of Economics, 7 (1), 105–31. 98. Stiglitz, J.E. (1974), ‘Risk Sharing and Incentives in Sharecropping’, Review of Economic Studies, 61, 219–55. 99. Stiglitz, J.E. (1975), ‘Incentives, Risk and Information: Notes towards a Theory of Hierarchy’, Bell Journal of Economics, 6 (2), 552–79. 100. Campbell, D.E. (1995), Incentives, Motivation and the Economics of Information, Cambridge: Cambridge University Press. 101. Markowitz, H.M. (1959), Portfolio Selection: Efficient Diversification of Investments, Hoboken, NJ: John Wiley. 102. Harrod, R.F. (1969), Money, London: Macmillan, St Martin’s Press. 103. McCulley, P.A. (2007), ‘Teton Reflections’, Global Central Bank Focus Series, PIMCO, August/September, https://www.pimco.com/insights/economic-and-market-commentary/global-central-bank-focus/teton-reflections, accessed 20 January 2014.