1. In a March 17, 2009, speech titled “Finance: A Return from Risk,”

delivered before the Worshipful Company of International Bankers in London, Mervyn King, governor of the Bank of England and chair of its Monetary Policy Committee, stated:

Banks are dangerous institutions. They borrow short and lend long. They create liabilities which promise to be liquid and hold few liquid assets themselves. That though is hugely valuable for the rest of the economy. Household savings can be channelled to finance illiquid investment projects while providing access to liquidity for those savers who may need it.

Explain what Mr. King means.