3 ms·
And yet post Glass-Steagell banks will happily borrow equities to short them, even with money provided by investors.
by tankenmate 9y ago
And yet post Glass-Steagell banks will happily borrow equities to short them, even with money provided by investors.
- Thriptic 9y agoInvestors loan them money with the knowledge that they do that, and banks have risk models in place to try to mitigate the risk associated with those trades. Banks agreed to extend credit to Bob from accounting so that he could buy consumer goods, not so he could participate in leveraged trading. The average individual is utterly unprepared for that risk and doesn't understand it, and banks aren't prepare to accept that risk. If you force them to, they will be much more conservative in who they give credit to, and the average user will lose out as a result. It's far easier to ban stupidly risky behavior than build it into their credit models. Also, if people want to do leveraged trading, there are mechanisms to do it outside of credit cards. The fact that people are using credit cards in itself suggests that they are unsophisticated and should not be doing such trades.