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a micro-loan bank that lends only to college graduates in the tech sector would probably be ultra competitive because default rates would so much lower than ave
by nazgulnarsil 18y ago
a micro-loan bank that lends only to college graduates in the tech sector would probably be ultra competitive because default rates would so much lower than average that they could give awesome rates.
who wants to start a 100% reserve bank, make profits in this manner and start the honest banking revolution?
- olefoo 18y ago> because default rates would so much lower than average that they could give awesome rates. That assumption should be questioned. First off, most if not all new ventures lose money. Second, if you are giving away free money you will attract scam artists. Third, do normal banks consider engineers to be a better credit risk than say lawyers?
- nazgulnarsil 18y agoI envision a YC like diligence process. More intensive than normal loans. But people do it for the low rates.
- eru 18y agoWhy mix-in the 100% reserve idea?
- nazgulnarsil 18y agofractional reserve banking makes the assumption that you can predict what the loan market will look like if you need to sell off any assets. relying on your ability to predict the future is not sound finance.
- eru 18y agoOK. Though I liked explicit term-deposits better (and they would also work with that idea).
- daydream 18y agoHow is something universally practiced (as is fractional reserver banking) not sound finance? The current crisis was not brought on by retail/commercial banks. It was caused by investment banks using way to much leverage, and trading complex financial instruments that where the risk was poorly understood.
- nazgulnarsil 18y agofallacy of the appeal to the majority. the current bank crisis was caused by alan greenspan's credit bubbles. the first one causes the dot com boom, the second caused the housing boom and was used to cover up the first.
- tocomment 18y agoI don't think you can make loans if you have 100% reserve. No?
- nazgulnarsil 18y agobank loans do not come from deposits. I don't why this myth is so persistent. http://en.wikipedia.org/wiki/Fractional-reserve_banking#Money_creation http://en.wikipedia.org/wiki/Fractional-reserve_banking#Mone...
- tocomment 18y agoIf the bank only lets you withdraw at certain times then yes, they could loan out your money during times you have agreed to. But no loans could be made from a savings account in its current form with a 100% reserve requirement.
- daydream 18y agoBank loans (among other things) certainly do come from deposits. In fact, it says so right on the page you linked: "Banks borrow funds from their depositors (those with savings) and in turn lend those funds to the banks’ borrowers (those in need of funds)."
- nazgulnarsil 18y agoyou're quoting something that the federal reserve puts out as an explanation of FRB. it is clear from the rest of that paragraph that they are speaking in loose terms meant to make things simple. read the paragraph on checkbook money. loans create money.
- stcredzero 18y agoSo you'd just be doing what these folks are, but with (hopefully) a more lucrative sub-population? http://join.lendingclub.com/borrowing.php?ppc=60209 http://join.lendingclub.com/borrowing.php?ppc=60209