Alex-- Nice site, thanks. I like this quote>>>>>>>>
"Courts have ruled consistently for almost 300
years that the money is the bank's to do with as
the bank wishes. The only thing that's changed is
the guarantor."
Lawrence Parks
Executive Director, FAME
Background
A "deposit" in a bank is in fact and in law a loan to the bank. Thus, a "deposit slip" is really a loan
slip. When one "deposits" money in a bank, the money goes on the bank's balance sheet as a
liability, i.e., something owed to the depositor, and the depositor becomes a creditor of the bank.
He no longer owns the money. The bank owns it. Courts have ruled consistently for almost 300
years that the money is the bank's to do with as the bank wishes. The bank may lend the money to
someone else, may invest it, or may make bets, sometimes called derivatives.
Taxpayers, who are mostly workers, subsidize banks by guaranteeing those who "deposit," i.e.,
lend, money to the bank, that their money will be returned in the event the bank loses it, thus
enabling banks to pay much lower interest rates to savers than they would otherwise have to pay.
Knowing that someone else will absorb the loss if they lose the money, banks take much greater
risks than they would otherwise. In other words, interest the bank pays depositors is reduced, and
the bank may engage in riskier higher-payoff bets with the money. If things work out, the banks
keep the profits. If not, taxpayers, i.e., workers, pick up the tab. Is that fair to workers?
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