Confessions of a Shiftless Mind

Do you not agree?

I find that banks, and even credit unions now, gouge us for every conceivable transaction fee or usage fee possible. It is ridiculous. Some might say, fair use, everyone does but they fail to take into account what a bank exists to do.

Banks are founded on the idea that businesses and individuals sometimes need cash that they don’t have. They exist to provide loans. Where do they get the money from? Originally, they got the money to lend by having people keep their money in the bank. The incentive for us to keep money in the bank (instead of our own private safes or sock drawers, or under the mattress) is that banks pay us interest on our deposits. The difference between the interest they charge on a loan and the interest they pay on a deposit used to be how banks made money.

Under this system, banks needed investors to keep their money there. They would not have the assets otherwise to lend. Their relationships with those with accounts used to be positive - they wanted your business and were prepared to do whatever they could to secure your deposit over the bank down the road. However, something happened in the last 50 years or so.

At some point (a finance major probably knows exactly what I am talking about), the government gave banks permission to lend money they did not have. They no longer needed to keep deposits on hand to cover the loans they held. They could essentially “make up” money from nothing. This meant that banks no longer needed investors and depositors. The beginning of the fee heist was at this time. Since then, the profits of banks skyrocketed, as they no longer needed to keep savings account rates competitive. They no longer care whether or not you save your money with them. In fact, deposit and account services are now a cost the banks feel you incur with them. Now, storing your money in a bank is a privilege, and they will make you pay through the teeth for it. Plus, all loans they give now are pure profit. They give you money they don’t have, and when you pay it back, plus interest, that is all new money and profit for them!

It disgusts me how much money they make, and how poorly they treat customers now. There is only one reason for it. They no longer need us to make money. 4.6 billion is an obscene amount of money. They have been making these kinds of profits for years now, if not decades. Where is all this money going I wonder? They aren’t lending it out. They aren’t spending it. What is happening to it?

_{This message brought to you by a temporary outburst of libertarianism. It is also by nature expressly anti-business and anti-commerce. What am I thinking, a good Tory bashing the moneylenders?}