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Fractional Reserve Banking and Other Things About Banks That Confuse Me

Fractional Reserve Banking Where do bank profits come from? If we restrict ourselves to thinking only about commercial banks and forget about investment banks (many banks are both things), I think they make money primarily by making loans and charging interest. Although banks start out life with capital from their investors, they really make money by making loans of the money deposited by you and many other people or businesses. In other words, banks only maintain a fraction of the money deposited with them on hand as reserves to cover daily operations. So, if a bank has deposits (assets) of […]

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