i wanted to make a thread about banking infrastructure for a while now, i did a search and nothing relevant came up. So! lets take a look at the Good
and Bad of keeping your money in the bank!
Banks wealth depends on its investors. These are the people who put money into banks, people who store their paychecks and people who deposit
valuables into safety deposit boxes.
This money then is used as the banks capital. They use this money to buy property give out loans and invest into stocks and bonds. This is where the
bank derives profit from holding people money.
As an account holder into a savings or checking account you are entitled to a due share of what you money was used for. which is normally a very
small amount of annual interest or whatever you agreed with your bank on.
Now as an "investor" in this bank you, by the governments doing, are entitled to a security on your deposit. This "insurance" is determined by
the FDIC, or the Federal Deposit Insurance Corporation.
The FDIC currently insures a depositor by 250,000 dollars per customer per bank.
As you can surely see that the bank (as of late at least) will make mistakes on "risks" as the aforementioned way of gaining capital. Their only
recourse is to charge the current "investors" a monetary fee of "small loans" or "payday loans" or even by selling insurance! (most lenders and
banks have their hands in insurance companies)
These "overdraft fees" and "payday loans" are a very real way to gain a significant amount of money on those that are unfortunate enough to not
pay attention to their statements on a regular basis.
These are fees that are set by the bank for when you overdraft your account. Meaning you spend more than you have invested into the bank. This
overdraft fee is charged to your account per charge and per location to your "investment" Usually no matter how much you overdraft "even by a
penny" you will be charged on average 37 dollars to cover your "delinquency" on your investment.
If you decide to pay your delinquency to the bank and not pay their fee, you will notice you still owe them the "delinquency fee". If you decide
not to pay that then you will normally be charged a fee per week if you do not pay the fee on your delinquency.
On to the conspiracy!
What then would happen to a bank if it was "delinquent" in its loan giving program.. or for a better term looking for "sub-prime" loans.
Sub-prime loans are by nature "predatory". They loan money to people who cant afford what they are buying or to people who have an already existing
credit line but want more credit from a different banking institution. What the bank does then is to initially make the "sub-prime" borrower pay a
greater fee monthly in paying off this loan. If this sub-prime borrower does not pay off the amount set forward by the bank it is considered a
Gains and Losses.
Gains to a bank is normally new "investors" and sub-prime loans. The bank makes very little money on people with "good credit". They rely on
those with bad credit and new depositors. Those are the money makers.
But as of recently with the increasing knowledge of the volatility of sub prime loans most banks are straying away from the up and coming loan
applicants. They need a way to derive profit without risk. The only way for a corporation to do that, without selling anything, is to charge its
"investors". As of recently its very easy to spot "predatory" investing. Those people who were delinquent on their "investments" or those who
had given the bank money without an expectation of significant monetary gain.
Heres the hot stuff.
So now that these banking institutions have found their low risk solution. How, pray tell, are they going to profit on it!
Predatory investments are simple. You convince the investor that their money will be safe. You also promise a small yearly interest rate for their
trust in your institution. But as you already know sub prime lending is a no no, your going to hold the money that they give you (careful not to
collapse yourself!). When that investor makes an error in their books you charge them per charge per institution they had paid money to. But it
doesn't stop there. As your online statements don't register till about a day later ... you have the opportunity to rearrange charges to make the
most amount of profit on overdraft "delinquency" charges as you can.
Now if this weren't bad enough if this investor declines to pay their delinquency they are usually charged per business week for not paying off
either "delinquency" or bank "delinquency fee's"
Its easy to show where the problem is but will it be equally easy to show the potential "new investors" why those banking infrastructures will
collapse? or if they don't make their money off the backs of their investors, as they wont pay their ceo's less whose going to lose?
I guess to keep this into one post ill let the reader decide ... Predatory banking? or put your money in your mattress?
What seems to be the best idea right now?
[edit on 2-11-2009 by conspiracyrus]