Re:The banks’ secret endgame
by retube on Friday August 23, 2013 @08:50AM
(#6263126)
> Retail banks take risks with their money
Huh? No! They are taking risks with YOUR money. When they lend on a mortgage, or make a corporate loan to a business they're doing that with YOUR deposits. This is how a savings account pays interest. They take your money, lend it at some interest rate and pay you a slightly lesser one. If the bank goes bust it's YOUR money which is lost: and this is why in most countries there are Federal Deposit Guarantees (i.e the govt will cover you up to some level if a retail bank goes bust)
Ironically this is precisely the OPPOSITE of the IB business model. They are NOT taking risks with your money: they fund in the money and debt markets, i.e they borrow the money to fund their activities.
Huh? No! They are taking risks with YOUR money. When they lend on a mortgage, or make a corporate loan to a business they're doing that with YOUR deposits. This is how a savings account pays interest. They take your money, lend it at some interest rate and pay you a slightly lesser one. If the bank goes bust it's YOUR money which is lost: and this is why in most countries there are Federal Deposit Guarantees (i.e the govt will cover you up to some level if a retail bank goes bust)
Ironically this is precisely the OPPOSITE of the IB business model. They are NOT taking risks with your money: they fund in the money and debt markets, i.e they borrow the money to fund their activities.