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"However, this should not continue into the institutions that hold the savings of the people who didn't want to play economic make-believe." How are these savi
by BrandonM 18y ago
"However, this should not continue into the institutions that hold the savings of the people who didn't want to play economic make-believe."
How are these savings going to provide any interest if they are not redistributed as loans? The whole point of a bank is to allow your money to work for you while also providing loan capital to those who have a good use for it. It's impossible to have a non-negative (due to administrative costs) savings account without loaning the money to someone.
Or am I completely missing your point?
- mindslight 18y agoHome/business loans made by a savings bank are subject to the reserve requirements. If these loans turn out to be bad and cause bank insolvency, the amount isn't huge because we're dealing with first-order numbers mostly backed by collateral. When the FDIC steps in to repay depositors, no money is lost (besides the bank's investors).
- BrandonM 18y agoOkay, I hoped that's what you meant, and not that savings banks should not be allowed to invest or loan money at all.