The financial system of the United States and other developed nations performs a number of functions that are essential for a modern private-enterprise economy. T wo of the most important of these functions are providing the means by which (1) payments for transactions are accomplished, and (2) savings are accumulated and channeled into investment uses. Paying for goods and services, saving, lending, borrowing, and investing are all activities that are carried out in the framework of instruments, institutions, and markets that constitute the financial system. Included in this framework are the financial agents of the central government, which in this country include the U.S. Treasury and the Federal Reserve System, as well as numerous private institutions and agents. A complex and sophisticated financial system is an integral and essential component of the economic system of any advanced, and industrialized society. T he financial system ’ s components can be defined as: financial instruments, documentary evidences of obligations underlying the exchange of resources among contracting parties; financial market, the arenas or mechanisms by which financial instruments are traded; and financial institutions, which create and trade financial instruments and otherwise facilitate the flow of resources among market participants. Financial instruments include bank deposits, debt securities and shares of stock issued by corporations. F inancial markets are the stock market, bond market, mortgage market, and what is called the “ money market ” (in which short-term debt securities are traded). Financial institutions include commercial bank, savings and loan associations, credit unions, insurance companies, and brokerage firms.