How Banks Make Their Money
Artiesha Artis
Introduction to Business
Professor E. Baltas
How do they do it? The Banks at work
When we think of businesses today we rarely take the time to think of how they actually came into existence. Of course we understand that each business is founded on a thought and we also known that it takes at least fifty ideas to generate one successful idea. However, once those ideas are placed into actions and become some of the great institutions we have today we tend to forget about the general purposes of why that particular institution was founded. As we progressed in class there was one thing that kept me in deep thought when it came to businesses. This thought is the basis of my research and that thought is how is it that a bank can loan money and continue to make money?
First a definition Brittanica.com defines a bank as an institution that deals in money and its substitutes and provides other services. Banks accepts deposits and makes loans and derives a profit from the difference in the interest rates paid and charged. Simply put banks operate on trust. Trust that we provide when we put our money into an account and trust that the banks provide where they in turn distribute loans without knowing whether or not they will get that money back.
Another Question may be arising in your minds and that question may be how do we know that we can trust the bank with our money? As long as the FDIC which is the Federal Deposit Insurance Corporation a company that insures your deposits up to $100,000 through the Banking Insurance Fund, protects your bank your money is safe. Therefore if your financial institution fails for any reason the FDIC have several options to remedy this action however the most common one is to sell your deposit to another bank.
Now that you know your money is safe what happens when you want to take your money out of the bank? Generally this is not a problem, we know...
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