Banks? March 25, 2010
Posted by Banking in : Corporations , trackback
Katie asked:
Where do banks get their money, like if their run out of money or how is the bank sure that their have enough money to lend to alot of people that are gonna start a business???
Where do banks get their money, like if their run out of money or how is the bank sure that their have enough money to lend to alot of people that are gonna start a business???
Comments»
I think they get the money from depositors, the federal reserve sets the ratios that banks must have on hand for withdrawals. not all people withdraw their money at once unless there is run on the bank.
Some people go to banks in search of a safe place to keep their money. Others are seeking to borrow money to buy a house or a car, start a business, expand a farm, pay for college, or do other things that require borrowing money.
Where do banks get the money to lend? They get it from people who open accounts. Banks act as go-betweens for people who save and people who want to borrow. If savers didn’t put their money in banks, the banks would have little or no money to lend.Your savings are combined with the savings of others to form a big pool of money, and the bank uses that money to make loans.
The money doesn’t belong to the bank’s president, board of directors, or stockholders. It belongs to you and the other depositors. That’s why bankers have a special obligation not to take big risks when they make loans.