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As banks are in the need of funds, new, innovative ways of attracting deposits are more interesting than ever. A new online financial service from the U.S. offers an ebay-like auction for new deposits. The model is simple: you put in the amount you can
deposit and the timeframe for it. Their system collects the bids from banks (in an automated way) for the interest rate. It works with CDs and high-yield savings accounts as well. The best rate offer can be picked by the customer.
As I can see their business is just starting now, and the offers are quite standard rates. Some more risky products would be good to see and more competitive rates too. However I consider this a good initiative in the fight for funds situation.
Do banks need funds? I thought they were all sitting on their own funds and frightened of lending it to others for fear of losing it??
They can't have it both ways? Do they need money to start lending again, or have they really got no money to lend?
What happened to the funds they had? Billions and Billions of real cash paid into deposit and current accounts. Who did they lend it to and with what 'security' or assets did they lend it. If those assets are realisable, then they should still have a
net positive balance sheet.
If I put money in an 'investment' and it goes south, then that is one thing. If I put it in a Bank, with a banking licence, I expect that cash to be as 'safe as houses' (well OK, wrong metaphor) and guaranteed.
I don't believe that the so called US sub-prime market has soaked up so much of the real cash - maybe a few billion. But the rest appears to have gone elsewhere....probably on big money financing which simply isn't going to turn a profit now that the bubble
burst. What that means is that the Banks gambled and lost our money, and when they recover and start making money again they think they can write it off.
Well they can't. If I borrow money and then lose it, the lender holds a lifetime right to get that back (unless I go 'bankrupt'). So if we prevent the banks from going 'rupt' then we WILL get our money back (you would think). As the value of the assets
that the banks hold rises again, surely
So, the banks might be in debt to us for a while, but they can't just say 'sorry, we lost all your money' and start again.
Now, I think I have deviated from your point quite a bit, and I am no expert on how the Banking system works (just on some IT aspects that support it!), but I enjoyed the mini-rant, which is why I joined this forum.
I enjoyed the mini-rant too!
Thanks, I liked your comment too.
However I think the new funds are needed to finance new customer loans, and not as a coverage for the existing deposits.
19 Mar 2009
This post is from a series of posts in the group:
A community for discussing the application of Web 2.0 technologies to financial services.