4 ms·

But the bank is in the position to “create money” to loan at 10% while also making that 5% on you. I don’t think it’s realistic to expect the bank to be interes

• pwatsonwailes 3y ago
  Depends how many people come back willing to sell their loans, and what that does to the liquidity position of the bank, and their current intentions regarding investment and the capital requirements to execute that.
• sokoloff 3y ago
  They still have reserve requirements, meaning the total money they can lend out isn't infinite and therefore the money they lent to me they might wish to have back and lend it out to someone else at the higher rate.
  • AnthonyMouse 3y ago
    > They still have reserve requirements Do they? https://www.federalreserve.gov/monetarypolicy/reservereq.htm https://www.federalreserve.gov/monetarypolicy/reservereq.htm > meaning the total money they can lend out isn't infinite and therefore the money they lent to me they might wish to have back and lend it out to someone else at the higher rate. That's assuming they have someone else to lend it out to who is not only equally creditworthy, but equally creditworthy at the higher interest rate and therefore payment amount.
• shawabawa3 3y ago
  By that logic you would expect banks to create infinite money and drive interest rates down to 0.00001%. the fact that doesn't happen should hint that you've misunderstood how banks work
• stocknoob 3y ago
  Banks have a reserve ratio. The money lent suboptimally to you at 5% has an opportunity cost.