second implication of the desire for low-cost security issuance is that most busi- nesses will prefer to issue fairly simple securities that require the least extensive incre- mental analysis and, correspondingly, are the least expensive to arrange. Such a demand for simplicity or uniformity by business-sector security issuers is likely to be at odds with the household sectors demand for a wide variety of risk-specific securities. This mismatch of objectives gives rise to an industry of middlemen who act as intermediaries between the two sectors, specializing in transforming simple securities into complex issues that suit par- ticular market niches.     The Government Sector   Like businesses, governments often need to finance their expenditures by borrowing. Un- like businesses, governments cannot sell equity shares; they are restricted to borrowing to raise funds when tax revenues are not sufficient to cover expenditures. They also can print money, of course, but this source of funds is limited by its inflationary implications, and so most governments usually try to avoid excessive use of the printing press. Governments have a special advantage in borrowing money because their taxing power makes them very creditworthy and, therefore, able to borrow at the lowest rates. The finan- cial component of the federal governments balance sheet is presented in Table 1.6. Notice that the major liabilities are government securities, such as Treasury bonds or Treasury bills. A second, special role of the government is in regulating the financial environment. Some government regulations are relatively innocuous. For example, the Securities and Exchange Commission is responsible for disclosure laws that are designed to enforce truthfulness in various financial transactions. Other regulations have been much more controversial. I. Introduction 1. The Investment Environment The McGraw−Hill Companies, 2001           10 PART I Introduction     Table 1.6 Financial Assets and Liabilities of the U.S. Government   Assets $ Billion % Total Liabilities $ Billion % Total   Deposits, currency, gold $ 98.0 18.1% Currency $ 25.0 0.6% Mortgages 76.8 14.2 Government securities 3,653.6 81.9 Loans 182.9 33.7 Insurance and pension reserves 708.2 15.9 Other 185.0 34.1 Other