You are using the therm "Market Makers" correctly. The key is the banks don't really set the price when they do this. They lend at a price just below what the

You are using the therm "Market Makers" correctly. The key is the banks don't really set the price when they do this. They lend at a price just below what they can sell on the other side. (They can't make money by bucking the markets) The challenge happens when banks veer from these activities, and start acting like hedge funds. It starts with banks carrying inventory. The slope gets slippery when traders start making proprietary bets on the inventory. Then proprietary desks get created, with Chinese Walls separating them from market makers. And then banks start investing their treasury in AAA securities that seem "risk free" according to ratings agencies....