Mittwoch, 28. November 2012

Ask A Banker: Are The Banks Still Too Big To Fail?

Q. What exactly does it mean to be too big to fail, anyway?

So: Banks are basically in the business of owing money to people.* All the money in your checking account is money the bank owes you. And banks' trading businesses are mostly conducted with borrowed money.**

Q. So why would a bank want to be too big to fail?

Remember: banks are in the business of owing people money. Being too big to fail makes you better at owing people money: if you somehow lose all their money, the government will step in and give you money to give back to them.

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