Bank use credit rationing rather than simply raising the interest rate charged borrowers with higher default risks because of fear of adverse selection problems. of interest rate cellings in many states. of fear of offending the loan applicants. use of credit rationing is encouraged by the Federal reserve. The United States has a dual banking system in the sense that the public may deposit money in either commercial banks or savings-and-loan associations. bank offer both demand deposits and time deposits to savers. banks are chartered by the federal government and by state governments. bank both take in deposits and make loans. Underwriting involves insuring the life or health of individuals. guaranteeing a price for new capital to the issuing firm. selling stock more cheaply than conventional stockbrokers. issuing stock and using the proceeds to buy bonds. When investment banks buy or sell securities on their own account. it's called financial engineering. pr