Re:IBM Stops Buybacks to Pay for Red Hat
by mruts on Sunday August 11, 2019 @04:38PM
(#20670327)
In our fractional reserve system, money is made through loans themselves, not deposits.
Moreover, being a bank is about arbitrage. Traditionally, banks arbitrage between short term loans (the federal funds rate and the overnight rates) and long term debt. i.e Banks borrow short-term and lend long-term. The way they make money is taking on risk: converting a lot of risk (long-term loans) into short-term risk (the banks borrowing at the overnight rate). This is where quants and models come in. It takes a lot of skill to turn that long-term risk into short-term risk.
Moreover, being a bank is about arbitrage. Traditionally, banks arbitrage between short term loans (the federal funds rate and the overnight rates) and long term debt. i.e Banks borrow short-term and lend long-term. The way they make money is taking on risk: converting a lot of risk (long-term loans) into short-term risk (the banks borrowing at the overnight rate). This is where quants and models come in. It takes a lot of skill to turn that long-term risk into short-term risk.