Ultimately, the source of funds for consumers who borrow is other consumers who have savings they hold in deposit accounts, life insurance and pension reserves, or portfolios of securities that include bonds, stocks, and mutual fund shares. Efficient markets for household credit are part of a well-functioning system of financial intermediation that allocates savings to the most productive uses.
The progressive integration of traditional lending and capital markets activities has created a fundamentally different financial system from that which existed from the mid-1930s through the mid-1970s, during which strict activities restrictions, limitations on competition, and deposit interest rate caps had shaped a banking system that was very stable and reasonably profitable, but not particularly innovative in meetings the needs of either savers or borrowers.