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You're right, but that doesn't necessarily make it a good thing. As a consumer (or a business client in the case of SVB), how does it benefit you that the bank
by cj 4y ago
You're right, but that doesn't necessarily make it a good thing.
As a consumer (or a business client in the case of SVB), how does it benefit you that the bank doesn't simply hold your deposits in a figurative safe somewhere?
At a minimum, I wish I could say it benefits us by banking being free.
Lending could be opt-in. There could exist banks who charge a premium for simply being the custodian of your money. (These must already exist)
Fractional reserve makes money easily available to those seeking money they don't have, at the risk of depositors whose money they're putting on the line.
(For better or worse. I'm not for or against it. I'm certain there are massive benefits to the system. But the reality is the average depositor probably doesn't realize their bank deposits aren't actually theirs - and that's why we have the FDIC)
- borski 4y agoLoans are what drive the economy. I’ve used loans for cars and my home, as have most people in the country. Many people make decisions based on income, and not on cash they already have, as few people have massive accumulated cash wealth. Loans are not always a bad thing.
- omgwtfbyobbq 4y agoLoans aren't a bad thing as long as they are effectively collateralized. If someone misjudges the value, volatility, etc, of collateral used for loans, those loans could be a bad thing if the borrower stops paying.
- borski 4y agoSure. That’s true of any financial instrument.
- stocknoob 4y agoYou’re looking for a brokerage.