Given below is an excerpt from a conversation. Who do you agree with? Provide a thorough discussion of the theoretical and empirical underpinnings of your opinion.

Appleton: Absolutely! I believe that when you cut through all the bull, the essential role of banks is to act as “lot breakers”

and provide simple transactions service. I can’t write checks against a T-bill, so I need a bank.

Butterworth: Alex, I couldn’t disagree more. Everything that I’ve read suggests that banks are special. Your proposal would destroy a key ingredient of the process by which society allocates capital from savers to investors.

Moderator: It looks to me like we have a fundamental disagreement: Why do we have banks and what do they really do?

Appleton: What’s to disagree? Ask anybody and they’ll say that banks are there to borrow and lend money.

Moderator: That’s obvious, but it hardly settles the issue, does it, Alex? After all, borrowing and lending are not services in themselves, but rather the visible outcomes of banks’ production of financial services. The question is: What are these less transparent financial services that banks and other financial intermediaries produce? You say that the services are purely transactional, while Beth claims they are much more.