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The bank can't pay because it has loaned the money out.
by cchooper 18y ago
The bank can't pay because it has loaned the money out.
- cx01 18y agoOK, but as I already said, the point of a checking account is to always have access to the money. You wouldn't call this a scam?
- cchooper 18y agoI wouldn't, because borrowers are compensated for the risk through the payment of interest (or other services, such as free transactions). A deposit at a bank is just like any other kind of investment: you get a reward because you took a risk. It's also worth pointing out that bank runs are incredibly rare events. In a correctly functioning market, a bank can always pay its depositors by securitizing its loans. In a dysfunctional market (such as now) there are usually government guarantees that help smooth the process. The big problem with banks at the moment is that they have been keeping insufficient capital to cover their losses. Insufficient reserves has not been a problem.
- cx01 18y agoNow I get your point. So basically we have different understandings of checking accounts. I'm not a lawyer, but in my opinion money in a checking account should always be redeemable. But you're kind of right that by depositing money there, people are agreeing to their money being lent out in exchange for interest.