Financial intermediaries are able to act as delegated monitors for individual savers because
A)other investors are unable to gain a free ride on their monitoring efforts.
B)borrowers consider this role to be traditional for financial intermediaries and are willing to put up with it.
C)the federal government has granted them waivers from laws protecting privacy.
D)they employ a vast network of private detectives to carry out their monitoring role.

Question

Quizplus · Accepted Answer

Financial intermediaries are able to act as delegated monitors for individual savers because they prevent other investors from gaining a free ride on their monitoring efforts. If individual savers were to conduct monitoring themselves, other investors could benefit from their monitoring without incurring the costs. However, by delegating monitoring to financial intermediaries, individual savers can protect themselves from this problem.

Financial Intermediaries Are Able to Act as Delegated Monitors for Individual