Banking Explained - Money and Credit

104 557
3 511
 
Banks are a riddle wrapped up in an enigma. We all kind of know that they do stuff with money we don’t understand, while the last crisis left a feeling of deep mistrust and confusion. We try to shed a bit of light onto the banking system. Why were banks invented, why did they cause the last crisis and are there alternatives?
Support us on Patreon so we can make more videos (and get cool stuff in return): www.patreon.com/Kurzgesagt?ty=h
Steady: steadyhq.com/de/kurzgesagt
Merchandise: shop.kurzgesagt.org
Newsletter: eepurl.com/cRUQxz
Facebook: bit.ly/1NB6U5O
Twitter: bit.ly/2DDeT83
Instagram: bit.ly/2DEN7r3
Discord: discord.gg/cB7ycdv
The Voice of Kurzgesagt:
Steve Taylor: voice-pool.com/en/english/
The music from the video is available here!
epicmountainmusic.bandcamp.com/track/banking
soundcloud.com/epicmountain/banking
www.epic-mountain.com
Help us caption & translate this video!
bgzone.info_cs_panel?c=UCsXVk37bltHxD1rDPwtNM8Q&tab=2
Продължителност: 6:10

Коментари

Kurzgesagt – In a Nutshell
Kurzgesagt – In a Nutshell - преди година
There's brand new stuff in the Kurzgesagt Merch Shop. Check it out here: shop.kurzgesagt.org
Anonymous User
Anonymous User - преди 2 месеца
5 reports for spam are from me.
w OO7
w OO7 - преди 2 месеца
Why do you not talk about fractional reserve banking how money can only come into existence as debt and how we all have become enslaved to the baking elite. This video I think is sponsered by the banks if you really want to find out how banking is a scam to the people of the world watch 'Money as Debt' on youtube
Josh Junco
Josh Junco - преди 2 месеца
My gf and I got your calendar and cute pushy duck bundle! We love you guys, thanks for what you do! :)
Wylie Wolfenstein
Wylie Wolfenstein - преди 5 месеца
No moar duck shirts?
Kuryux
Kuryux - преди 10 часа
Captain, what would be the "though new regulations" that got blocked by the "bank lobby"?
ericsiqueira1
ericsiqueira1 - преди 16 часа
Well, if you don't even mention the role of central banks, the explanation is inaccurate.
Jennifer Davis
Jennifer Davis - преди 22 часа
I tried this method and it really worked! I was very impressed. I got £15,000 from wirmonhackers com..
MrMoses86
MrMoses86 - преди ден
100's of billions JUST EVAPORATED hahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahaha you couldn't make this shit up
Nomad's Inn
Nomad's Inn - преди 2 дни
Once you fake sincerity, you can fake anything. Thats global banking.
ABHINAV
ABHINAV - преди 2 дни
Understanding the quantum mechanics is much easier than this.
EyFmS
EyFmS - преди 4 дни
So basically if you save money,the bank is lending it to someone else anyways so they can buy shit online...Great.
EyFmS
EyFmS - преди 4 дни
Maybe just maybe...we could get rid of the curent current banking system??
Colleen De Allende
Colleen De Allende - преди 4 дни
very informative .
Avabeth McGhee
Avabeth McGhee - преди 4 дни
Over 3,400 bankers watched this video.
Ace Hardy
Ace Hardy - преди 5 дни
💲
Kumar Rahul
Kumar Rahul - преди 5 дни
I truly didn't understand , only because my brain was appreciating the animation.
Dex Lab
Dex Lab - преди 5 дни
Dead Wrong! Banks do not take deposits and then lend that out (that is a fairy tale from the 1950’s). In reality, banks leverage people’s deposits 10x times and lend that out. They also receive currency from the Fed Reserve at near 0% interest and then leverage that 10x times and lend that out as well....of course, what could possible go wrong with that....if you said that would imply more total debt than total currency you’d be correct (gold star for you!). Thus, the total debt can NEVER be repaid and the system is built to CRASH by DESIGN.
We Deserve Better
We Deserve Better - преди 6 дни
Crowdfunding is a good thing? Shhh, don't tell Seth MacFarlane...
Koning Florian
Koning Florian - преди 6 дни
''who will do it (banking) and how it's done in the future is up for us to decide though''
- Yeah, right!

"The governments of Europe and the USA jumped in to save the banks from collapse"
- More like the banks took risks and went bankrupt because they knew they would get bailed out, and the whole economy is STILL based on free money from the government to the banks to big business, only not to YOU!
ekisukmars
ekisukmars - преди 8 дни
What about templar ?
Nick Niehaus
Nick Niehaus - преди 10 дни
Aye Pikachu
U-tube editoR
U-tube editoR - преди 11 дни
dont do checking, only ever do [savings]...ask around, youll know why...
Magoo Gouzoo
Magoo Gouzoo - преди 13 дни
Not very accurate description of the banking system.... Banks don't lend deposits. Banks create money by issuing credit. They use deposits as collateral. They make money by borrowing short and lending at a higher interest rate. Basically...
Too Devilish
Too Devilish - преди 13 дни
They didn't pay fines only one person got arrested
Ria Coleridge
Ria Coleridge - преди 14 дни
*Takes a loan out*
*Uses all the money to pay back the loan*
STONKS
*Forgets to pay back the loan*
Policemen punches hike in the face*
BONKS
richard klegin
richard klegin - преди 14 дни
yeah thats bullshit . credit unions are for the members, tell that to my union
Ron Burgandy
Ron Burgandy - преди 16 дни
*How can you POSSIBLY do a banking section and not mention LEVERAGE* ???
🤷‍♂️🙈
I dont get the joke and never will
I dont get the joke and never will - преди 18 дни
Bruh my deadass thought money travels to a universal tunnel just to get to the ATM where he withdraws..
t NepC
t NepC - преди 18 дни
Someone tell me how different this is from ponzi schemes?
Wojtek The Bear
Wojtek The Bear - преди 14 дни
It shares characteristics with a Ponzi scheme, but it isn't one. For one, your money is guaranteed by the US government through various entities no matter what. No matter what happens to the bank, you'll get your money back.
G S4ndy
G S4ndy - преди 20 дни
What an old days with Kurzgesagt... 😍😍👍
86zeruel dososo
86zeruel dososo - преди 21 ден
00:50 "Banco" is italian for "desk", not "bench".
(Bench is "panchina".)
Sujeong Kwak
Sujeong Kwak - преди 22 дни
Banks had to pay fines for causing the 2008 financial crisis, but we also had to bail them out. How does that work? And why did bank CEOs get millions in salary+bonuses instead of going to jail?
Wojtek The Bear
Wojtek The Bear - преди 12 дни
​@Sujeong Kwak There's a lot of important details to cover. 1. Banks never made anyone take these loans. Instead the loans were offered to the subprime borrowers and they accepted them. So if you make $20,000 and have a poor credit score, you still might be offered a comparatively low interest mortgage loan by your bank. If you don't want it, they might offer some incentives, like a 12 month delayed payment on the mortgage, or try to sell you on it, but at the end of the day, you're the one to take the loan. The banker would typically mention how housing is an investment. So in five years the house you bought would be worth more money. If you wait until then and sell the house, then you could pay back the mortgage with money left over. Historically this has been correct. Since the populations of most countries has been increasing, and housing in developed countries usually doesn't keep up with it (for reasons I won't get into), housing prices generally increase over time. In other words, it was a little sleazy, but (most) bankers weren't forcing these loans on anybody, and they didn't intend to destroy the economy. 2. Remember, the people holding the mortgages were not the same ones who originally gave them out. A commercial bank would usually end up selling the mortgages to other companies for a quick injection of cash to, well, make more mortgages. So Bank of America would sell slices of a package of 1,000 mortgages to Lehmann Brothers and get millions of dollars that they could then loan out again. When it came to repossession of a house, it would be given over to the holder of the mortgage, which would be an investing institution, mutual fund, etc. It's also important to note that repossession was always the worst case scenario for both sides. The investing institutions never wanted the house, they wanted the money from the mortgage. Houses take time and money for them to sell, and they were only going to make cents on the dollar, never recooping the full amount of the mortgage loan. That's why places like Lehmann Brothers went bankrupt. Instead of receiving payments from the mortgages, they instead received houses, which they couldn't pay their own expenses with. 3. So why did no one realizing that this was contributing to the housing bubble? Well for the early parts of this, no one was sure there even was a bubble. A bubble is only when the perceived value of an asset is above the fundamental "true" value, but that value is impossible to calculate.....generally. Technically models can be made, Nobel Price winning economist Robert Shiller is the most famous example of this, but the models weren't tested, so no one knew how accurate they were. This was also the time of the Tech bubble, so people were worried about other things. Around 2004-2005 the majority of financial experts started to agree that the housing market was probably in a bubble. Yet again though, knowing you're in a bubble is only half the battle. What's to be done about it? If you're too loud about it, you're only going to cause a panic and make the potential crash even worse. Say nothing and it will probably only grow bigger. I don't want to say much more as this period of time I know the least about, but more generally the financial experts were hoping, and implementing policy, for the housing market to gradually devalue over time, avoiding an inevitable crash. This type of thing happens all the time in financial markets. For every bubble that burst, there were ten bubbles that we didn't even see because they fizzled out. 4. And finally, wasn't loaning money to subprime candidates viewed as unethical? Quite the contrary actually. This was actually promoted by the US government since the 1990's (Started under Bush Senior, expanded under Clinton, continued under Bush Junior). This is because the economic research at the time (and even today to a lesser extent), showed that the ownership of a house was one of the leading indicators on a person's potential economic upward mobility. This goes back to the view of a house as an investment. Outside of its monetary value, it provides a stable place for kids to learn and grow, gives them a sense of community, and is passed down through the family. So the US government would promote subprime mortgages under the belief that just owning a house for a poor person would make them much more likely to increase their income and move them into the middle or upper class. Some people like to say that the government solely caused the bubble and Financial Crisis because of this (and a few other things). While they didn't help matters, the banking industry was already moving in that direction after the Savings and Loans bubble,
Sujeong Kwak
Sujeong Kwak - преди 13 дни
@Wojtek The Bear Thanks again for the explanation. But how is banks inducing subprime borrowers to borrow not unethical/risky/greedy? Making people borrow money when you know they can't pay back so you can repossess their home after collecting interest is unethical. And it's risky bc housing markets dropping (boom/bust cycle) is inevitable. And how could no one notice that subprime mortgage lending would contribute to a housing bubble? I'm learning a lot from you, but I still can't be shaken from my opinion that banks were unethical.
Wojtek The Bear
Wojtek The Bear - преди 13 дни
@Sujeong Kwak The interest payments generally weren't high. That was actually one of the problems. Since the pool of people to give mortgage loans to was growing so small, commercial banks resorted to giving a lot of incentives to subprime borrowers to get them to, well, borrow. These incentives include lower interest rates, delayed payment, the ability to refinance in the future, etc. And again, you're acting like everyone knew that these loans were risky. I few did (The Big Short gives a good example of them), but most thought that these packaged mortgages were completely safe. This is because everyone already knew the rate at which subprime borrowers defaulted on their loans, so predicting how many mortgages would default on any give day was easy to predict. Few people expected the whole housing market to crash like it did, and no one understood how closely connected the housing market was to our financial industry, nor how closely connected our financial industry was to everything else. This all would've been known if the US financial regulatory system was more centralized, but instead it was, and still is, very patchwork, so no single entity has all the information when it comes to financial institutions. Similarly before there was absolutely no regulation for investment banks and credit reporting agencies since they weren't financial intermediaries. This is where the term shadow banking comes from. Dodd-Frank, while patchwork itself, did add some regulation to them, and other entities considered too important for the US economy, but I'm not sure if it's still even a thing under Trump.
Sujeong Kwak
Sujeong Kwak - преди 13 дни
@Wojtek The Bear Thanks for explaining things. But by your explanation, yeah, banks, both commercial and investment, are worthy of criticism and blame. The commercial banks are to blame to lending mortgage money to people they knew wouldn't be able to pay back in full. They wanted the short term high interest payments. That's predatory and risky. And packaging and hiding bad loans (subprime mortgage loans) to appear like good loans is definitely unethical. People knew these things were built on a house of cards, but they didn't care bc they were making money in the short term. As for investment banks, by your own words, they were doing shady things. The payment and impact of CEOs is something we can agree to disagree on.
Wojtek The Bear
Wojtek The Bear - преди 13 дни
@Sujeong Kwak ​ 1. Investment institutions and credit reporting agencies to some degree, sure. Commercial banks not so much. 2. Sure, but you can't blame a financial institution due to a financial bubble and economic downturn simply for operating in the industry. Bubble's happen because an asset is evaluated well above its true value. There's nothing criminal about it, just a mania and panic. 3. Some of that was shady, but a good portion was just good business. Your company is in a rut due to a global economic crash. Obviously you're going to pay a premium to make sure the CEO doesn't jump ship when you need a leader the most. In other words, companies in a rut are the ones in the most demand for good leadership. So how did the bankers working at these banks not know that these assets were risky? This is actually an excellent question, but first we have to properly define what a bank is. A bank usually refers to two different entities. Either a commercial bank, which acts as your typical bank would, a financial intermediary between depositors and borrowers, and an investment bank, which solely tries to profit off of the purchase of financial assets. It's important to note that the commercial banks going out and loaning out the subprime mortgage money were not the ones holding on to these mortgages. Instead they'd package hundreds of them up together, split up the package, have them rated by a credit rating agency, and then sell them off to investors. So as an investor instead of buying up ten mortgages, where even if one mortgage defaulted, I'd lose money, I'm instead buying a small stake into hundreds of mortgages. This way if one or two mortgages fail, I'll still make a profit. Also my profit will be more consistent thanks to the law of large numbers, a fundamental of statistics. Because of this, these packages were often rated much safer than they should've been. It didn't help that the credit reporting agencies had their own desire to rate them as higher than they should've been as then they'd get a kickback of their own. And then investment banks would buy them, not realizing how risky they actually were. In the background these investment banks were doing incredibly shady and unethical crap to acquire constant funding to purchase these packages, but that's a topic for another day. So that's basically it. After the collapse of the bubbles for the two safe assets all banks were trying to invest in before this (developing country governmental debt and tech stocks), banks thought they found a new safe asset in these packaged mortgages, which made mortgage loans safer and more predictable ignoring external factors. Of course then the entire housing market collapsed, throwing an external factor into everything. Mortgage backed securities (the packages) are 100% safer than traditional mortgages, which is why they're still used, but even they don't help when the entire market collapses. Ironically most commercial banks were spared the vast majority of the problems as they weren't the ones holding the mortgages. It's the investment banks that lost out big, and it's that reason, among others, that many of them went under. The most obvious and notorious being Lehmann Brothers.
hao yaaar
hao yaaar - преди 22 дни
that's 2.5 trillion dollars bruh
Adarsh Kumar
Adarsh Kumar - преди 24 дни
2:00 Who else wants a Pikachu money bank.
Boom309
Boom309 - преди 26 дни
1:03 excuse me what did you just say?
REM chan
REM chan - преди 27 дни
The most complex explanation video in the channel.
Thanos
Thanos - преди 28 дни
"A banker is a fellow who lends you his umbrella when the sun is shining and wants it back the minute it begins to rain"
Destini Garett
Destini Garett - преди месец
I'm always working with trusted lenders, check *_OneLendOpp.c o m_* (remove gaps),

It will not take your money with excessive rates, give it a try if you're in need of some cash.
Muslims Against Evil Feminist and Atheist
Fuck banks and white men and women
Louisianaball
Louisianaball - преди месец
Don’t take loans, rob banks. Get back at these fuckers
EyFmS
EyFmS - преди 4 дни
If you rob a bank it's the people money you are going after...better to rob the bankers properties or take on them directly.
mimi yun
mimi yun - преди месец
Do you dislike the banking cartel that has been controlling for decades over YOUR MONEY ?
“You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.”/ Buckminster
Buy bitcoin !
Wojtek The Bear
Wojtek The Bear - преди 14 дни
Bitcoin sucks.
Dead Ringer -Cult of Deathrattles
Dead Ringer -Cult of Deathrattles - преди месец
Weird to hear the intro toon from 4 years ago, even though I was still a subscriber back then, I just forgot it had changed.
Karan Taneja
Karan Taneja - преди месец
Ok
Sharon John
Sharon John - преди месец
I still don't get it and will forever be mad at the education system for NOT TEACHING USEFUL THINGS
Wojtek The Bear
Wojtek The Bear - преди 14 дни
Commercial banks act as an intermediary, accepting deposits from those that are saving money, and loaning out money to those that want an injection of cash for something. That's really it. That's all a commercial bank is.
Tim Max
Tim Max - преди месец
4:49
*Nintendo would like to know your location*
Anto26
Anto26 - преди месец
There is an etimology mistake: bank derives from the italian word "banca", derived from "banco", a table or desk
ᖇᗩ乙0229
ᖇᗩ乙0229 - преди месец
Banks going bankrupt!

That's devastating!
Stefano Gilardoni
Stefano Gilardoni - преди месец
Actually "bench" must be translated in "panchina" or "panca", while "banco" means "desk" or "stand" :)
Very nice videos, though
ankur
ankur - преди месец
One correction, banks take saving and land it...not once but many time over. If cash reserve ratio is 10% they can circulate the money 10 time over. Fractional banking system, bank are not just the financial intermediaries, they are in business of "creating money" out of thin air.
But even that's not enough for them so they trade in riskier Businesses to increase there profit s.
Wojtek The Bear
Wojtek The Bear - преди 13 дни
@ankur Actually regulations are tighter (or were before Trump). Just look up Dodd-Frank. The issue with the Financial Crisis wasn't the commercial banks, which operated mostly as intended, but the investment banks and credit reporting agencies, which, as they were unregulated, did a lot of shady crap that set off the Financial Crisis. As for bailouts, it's important to know what they were. For one, the bailouts were never free money. They were typically either a loan or an asset purchase by the government. This is because the banks generally were still financially well off, they just didn't have enough cash on hands to meet their needs. Like how if you put all your money in the stock market. Technically you'd be making money, but you can't pay any of your bills. This loans have already been paid back in full, and, with the selling of the previous bought assets, have netted the government a nifty 10% profit.
ankur
ankur - преди 13 дни
@Wojtek The Bear They are regulate as they were as the time subprime crisis. Unsuspecting people were conned with exotic instruments in that highly regulated environment. After that Taxpayers money was used to bailout these giant banks. And guess what those instrument are back with a new name Bespoke Tranche Opportunities.
Wojtek The Bear
Wojtek The Bear - преди 13 дни
This is somewhat wrong. First: Banks are regulated on how risky their investments can be. They are not allowed to make risky loans by federal law. Second: That's not how FRB work. Banks don't lend out 10 times as much money as deposited. The 10% reserve ratio means that 10% of the original money must be kept in reserve. So in a single deposit, only 90% of the money can be loaned out at a given time. Of course with repeat deposits and loans, you can end up 1/(FRR) or in this case 1/.1 which is 10 x the amount of money in existence, but a chunk of it wouldn't be circulating, and this still falls within the function of them being an intermediary since this wasn't done in a single transaction. The single transaction in this scenario is the bank lending out 90% of the deposit to someone else. That's exactly what an intermediary does. If that loaner than went to his bank and deposited the money there, then they'd only be performing their duty as an intermediary as doing similarly as before.
jackgoldman1
jackgoldman1 - преди месец
The Federal Reserve bank earns 12,000% interest per year. Banks earn vastly too much for doing nothing.
Wojtek The Bear
Wojtek The Bear - преди месец
No they don't. You can literally check their audited financial statements through a simple google search and find that that's not that case. Moreover, they don't even make a profit. Any profit they make is given to the US Treasury at the end of each fiscal year.
Raid2500
Raid2500 - преди месец
Funny fact is - no matter how complex bank inside when owner have troubles with the law - bank get collapse. Small only, of course. Large banks never have this problem. Strange why.
Raid2500
Raid2500 - преди месец
​@Wojtek The Bear is they really has problems with the law ? They was collapse because handed out mortgages to all comers regardless of solvency. It's not illegal as i know, so not the same case.
Wojtek The Bear
Wojtek The Bear - преди месец
That's straight up not true. Large banks can, and have, collapsed. Lehmann Brothers is the most obvious example.
The Truth of the Matter
The Truth of the Matter - преди месец
It wasn't the banks fault in 2008... the government pushed anti redline banking policies... thanks to Bill Clinton and then Obomber.
The Truth of the Matter
The Truth of the Matter - преди месец
@Wojtek The Bear it actually started under Johnson with his Fair Housing Act and was bolstered by Jimmy Carter and the Community Reinvestment Act...but the damaging amendments to the CRA came from Bill Clinton. Now I liked Clinton but he created a very strong yet very weakly rooted economy. Under Clinton the Fair Housing Act went from 4% effectiveness to over 80%...basically meaning 4% of people who weren't qualified for a mortgage got one until Clinton...under him suddenly over 80% were successful in getting a mortgage that they simply couldn't afford. The bubble grew and burst under Bush and he was too stupid to address the crisis and Obomber had too many regulatory policies to allow the market to heal quickly. Obomber resided over the slowest economic recovery in recorded history.
The Truth of the Matter
The Truth of the Matter - преди месец
@Wojtek The Bear who claimed to know the truth?
Wojtek The Bear
Wojtek The Bear - преди месец
@The Truth of the Matter I know, your ignorance on the matter, especially for someone claiming to know "The Truth" is sad.
The Truth of the Matter
The Truth of the Matter - преди месец
@Wojtek The Bear 🤣
8O8clap
8O8clap - преди месец
You forgot an important factor about the 2008 mortgage crisis: the banks didn’t just up and decide to give easy credit to masses of homebuyers overnight. The banks are concerned about profit. Why would they give loans out with full knowledge the debtors would default, where previously most of these same people were denied a loan by that same bank? Another thing to thank the federal government for. Strict banking regulations were passed (usually along with accusations of racism according to loan denial stats) forcing banks to give out mortgages they knew would go into default. So what does the federal government do? Legislate more banking regulations into place resulting in massive bailouts and government favoritism like we’ve never seen before. An example of this type of favoritism is Amazon paying 0 tax in 2018 and Tesla paying negative tax years prior. But wait, aren’t these mortgage defaults and legal tax evasions supposed to be the result of an unfettered free market run rampant?
After 2008, there should be no distinction between private banks and central government. Some of the bailout stipulations have been compared to government seizures. This is probably true since many of the banks weren’t given the option to refuse bailout money. The only thing preventing the checks and balances between the public and private sectors from crumbling is the possibility of banking institutions becoming obsolete through blockchain technology. If credit unions can handle loans in customers’ best interests and blockchain can securely manage transactions, what’s the point of a bank? Maybe we’ll still need their atms. But look how fast the Washington elites have scrambled to shut down various cryptos
8O8clap
8O8clap - преди месец
Wojtek The Bear how am I wrong? The housing market has always been federally controlled. Poor lending standards were present for decades via the Community Reinvestment Act. Mortgage backed securities don’t change risk involved either. If the same bad lending practices are in place, one can assume the result will be the same number of defaults. So while 1 in 10 defaults could make a venture unprofitable, so would 100 out of 1000
Wojtek The Bear
Wojtek The Bear - преди месец
"Why would they give loans out with full knowledge the debtors would default, where previously most of these same people were denied a loan by that same bank? Another thing to thank the federal government for. Strict banking regulations were passed" So wrong. First, regulations didn't get stricter. If anything they lessened (like the dissolving of Glass-Steagall, though that specific regulation wouldn't have solved anything anyway). The US financial regulatory governance is a hodge podge which makes actual management of it hard. Some state banks are members of the Federal Reserve, others are part of their own state version. Some join the FDIC, some join a state version, etc. Often the regulatory agencies would compete with each other for clients, cutting deals in the process that would be bad regulatory-wise. This also meant no single entity had all the information, which ended up proving bad. So why did banks offer mortgages to lower income people? Information asymmetry, moral hazard, as well as the creation of mortgage backed securities. Through mortgage backed securities, the risk of a mortgage becoming unprofitable due to a default lessened considerably. Instead of holding 10 mortgages where even a single default could prove the whole venture unprofitable, a bank would instead hold a small stake in 1,000 mortgages. That way even if ten or twenty people default, the venture still would remain profitable. The problem became an information asymmetrical one though. In other words, some people believed that they were far safer than they really were, and that idea was exploited. Commercial banks, the ones that gives mortgages, rarely were the one to hold the MBS. Typically they'd just sell them off to the highest money for a profit, then use the profit to make more mortgage loans. The ones who actually held the MBS' were investment banks, which don't give mortgages. This led to a moral hazard problem. The commercial banks just wanted to get as many loans as possible. It didn't matter their risk as they wouldn't be the ones to hold them. As long as they made the quick profit from selling them off, they didn't care. But shouldn't the investment banks have known about the risk? Yes. The MBS's were supposed to go through a credit rating agency so that their risk would be rated. It was the agency's job to determine what the risk of default for all the mortgages were. The probably is that, for numerous reasons, they had a vested interest in rating them higher than they actually were, some investment banks were typically none the wiser. So then what happens when the whole housing market crashes and everyone starts defaulting? MBS' were supposed to protect against the day-to-day risks of default, obviously they're useless when the whole market collapses. Generally it was the investment banks that were the most effected. Take the infamous case of Lehmann Brothers for example.
Not Imran
Not Imran - преди месец
STONKS√ !!!
Paris Allen
Paris Allen - преди месец
If someone said it was a way to make money and all I had to do was give a $100 fee and the bank that they work with will send 3,000 to build their company by transactions would that be a smart move
Victor Gilinsky
Victor Gilinsky - преди месец
A childish, misleading description of what banks do in a modern economy. It doesn't even mention the banks' role in creating money.
Alp Arslan
Alp Arslan - преди месец
Fucking banks !!!!
This is Patrick
This is Patrick - преди месец
Damn, even under all of these rigid institutions (banks, infrastructure, governments, etc.) our society is pretty flimsy.
postblitz
postblitz - преди месец
It was never designed to change fast. The slow speed and tons of verifications is what made things non-flimsy enough to last for centuries. Computers and borderless comms (internet) changed the speed to FAST.
John Marcella
John Marcella - преди месец
I am very happy, I just got a transfer of $45,000 from expeditetools ,com for the new year.
Soft Girl
Soft Girl - преди месец
"Bench" in italian is "panchina"? Did you mean "banco" as in table?
Ferricity AMV
Ferricity AMV - преди месец
What is the role of central banks?
Wojtek The Bear
Wojtek The Bear - преди месец
Central banks are a bit of a misnomer. Think of them more as a governmental arm that handles monetary policy (how much money to print, what interest rates should be, what inflation should be, etc). Otherwise, they also act as the bank of last resort. Basically if a bank is in an absolute crisis and no other bank wants to give them a loan, they can instead go to the central bank itself and ask for a loan. The whole idea of a central bank is that they're connected to the government in some way, but they're independent from the other functions of government, so they don't get involved in party politics or the whims of whoever is in charge. While it's good for a president to just print money and hand it out to people right before an election, it's bad monetary policy. Hence why central banks are independent from other governmental bodies.
Luke Boswell
Luke Boswell - преди месец
Hey how ya doing lets see how many likee this can get
Paul Gibbons
Paul Gibbons - преди месец
Banks off no incentives to save. Rock bottom interest rates. So how do they make money ?
They sell your details to the government.
Socialist Idiot
Socialist Idiot - преди месец
@Paul Gibbons then the government has your details already.
Wojtek The Bear
Wojtek The Bear - преди месец
Bullshit. You realize that most banks publish their audited financial statements, right? They're also typically regulated and overseen by some government entity. Banks make money from lending to borrowers as well as investing in financial markets through what are deemed as very safe stocks and bonds.
Paul Gibbons
Paul Gibbons - преди месец
@Socialist Idiot yes
Socialist Idiot
Socialist Idiot - преди месец
"They just sell your details to the government" Don't you pay taxes?
Напред