So, I’ve had this idea for a while and have discussed it with Mark. I want to know, from someone who seems smart, if this idea is legit.
Banks hold people’s money and give out loans. They make money by taking their client’s money and making investments, typically low risk ones. They also collect interest on loans.
In Las Vegas, if everyone won the slots at the exact same time, the casinos would be screwed. Banks are the same way; if everyone withdrew their money at the exact same time, the banks would be screwed. The banks have some money at hand, of course, and they have that antique robot you are keeping inside the local bank’s vault, but the rest of the money invested.
Which brings me to my radical model: banks should hold peoples money for free. No fees; no ATM fees, no yearly fees, no overdraft fees. They get away with this crap because all other banks do it. But I’m pretty sure banks make enough money just on investments, and that a bank could just do that and be dandy. Imagine how simple this bank would be, and how much people would want to be in business with them.
two things:
1. if everyone took their money out of their bank at the same time, we would have another 1929. This is what happened–people wanted their money and the banks didn’t have it. However, because of that, the FDIC was created to ensure that banks were able to pay their customers. So, it wont happen again.
2. It seems to me that banks will never put fees,etc at $0 because what would happen if their investments tank? Bad news for mr. banker. The point of a bank is to make money, so why not capitalize on the desire of consumers to have their money safely stored and charge a fee to make some more cash.
-Dutch