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I've looked into the history of Mondragon and what is often overlooked is the fact that their credit union could legally offer higher interest rates to deposito
by pg_bot 4y ago
I've looked into the history of Mondragon and what is often overlooked is the fact that their credit union could legally offer higher interest rates to depositors than competing banks. So they were able to accumulate the capital needed to finance their operations and expansion somewhat unfairly. If you wonder why there aren't more Mondragons in the world do more research on the history of Caja Laboral Popular.
- woodruffw 4y agoCould you elaborate on why that higher interest rate is unfair?
- hackerlight 4y agoThey didn't claim that the higher interest rate is unfair per se. They're claiming that the regulators allowing Mondragon to have exclusive monopoly access to the high interest rate market is what's unfair.
- mandelken 4y agoThis is a very strange argument, because banks do not lend out deposits. Deposits are created jointly with each new loan on its balance (and destroyed when the loan pays back). Offering higher deposits is actually a higher cost for a bank and lowers its profitability.
- kortilla 4y ago> This is a very strange argument, because banks do not lend out deposits. Deposits absolutely drive how much a bank can loan though. Otherwise banks wouldn’t bother taking deposits at all. Look at the history of what the Narrow Bank attempted to do. It tried to drop the whole loan side of the business and effectively offer the fed funds rate directly to depositors. They were rejected because it was detrimental to the whole ecosystem of loans.
- monodeldiablo 4y agoI wouldn't quite call it "unfair". Credit unions worldwide tend to offer higher savings rates because they distribute their profits to depositors as interest yield instead of to shareholders as dividends.