1. Bourse [buas] — (фр.) парижская фондовая биржа

2. to facilitate savings and investment — способствовать сбережениям и инвестициям

3. to dispose of securities — реализовывать, избавляться от ценных бумаг

4. to back — поручаться (подтверждать, удостоверять)

5. fraud, sharp practice — мошенничество

6. deregulation — дерегуляция

7. the clearing banks — клиринговые банки (банки безналичных расчетов)

8. by word of mouth — устно

9. the Big Bang — реорганизация на Лондонской фондовой бирже в 1986 г.

10. the best bid — наилучшее предложение цены

18.7.1.2. Read the text “The Function of Securities” and explain in written form the peculiarities

of issuing stocks or bonds by lending companies.

Governments and corporations need money in order to operate. Governments get money in

two ways: through taxation and through borrowing. When governments borrow, they issue bonds,

or certificates of debt. These certificates pay interest to the people or institutions that buy them.

Thus, a person who buys a bond expects, over a specific period of time, to recover the principal —

the amount of the loan — plus the interest — the fee the government pays the lender for the use of

the money. Corporations likewise have two means of raising money (apart from their own profits).

They may borrow it, and in doing so they may also issue certificates of debt. These certificates are

called debentures, or, more commonly, bonds. Like government bonds, they pay interest to the

buyers.

The second way for companies to raise money is to issue stocks, which represent ownership in a

corporation. A company is literally selling part of itself to raise money. (The terminology varies

between Great Britain and the United States. In Great Britain a company is said to issue shares,

while in the United States a company issues stock. In the United States stock is divided into shares —

100 Shares of ibm stock, for example; in Great Britain “stock” has the same meaning as “bond”

does in the United States. Here we use the American terminology.) Bonds and stocks are together

called securities. The term stock market, though somewhat imprecise, is used to name the industry

In which stocks and bonds are bought and sold.

Just as governments must weigh the merits of higher taxes versus the merits of borrowing, so

corporations must decide whether to raise money by borrowing or by issuing stocks. There is a

greater risk in borrowing because the company puts itself in debt to someone else. If the debt

cannot be repaid, bankruptcy may result. By borrowing, however, management has more control

over the operations of the company, whereas when a corporation offers stock to the public, a degree

of control is lost. Management becomes responsible to the ownership — those who hold the stock.

Stock issues also decrease company income because dividends must be paid out to stockholders

from company profits. New companies are quite likely to issue stock, since they are seeking venture

capital, or start-up money.

The Function o f Securities

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Commentary and Notes to Text 18.7.1.2