ok 2 type of bank: investment banks, which covered in Liar’s poker, and commercial banks. Here is a concept of commercial bank schemes from talking through a coworker.

Ok, so commercial bank can only invest a percentage in funds what not, required by law, and give out loans, but not issue securities. so follow with me here for a second. everything is well when market is doing well and they make money on their investment returns. when market get too hot, but not yet busting the bubble, they convert their funds to cash, of course they would probably predict this a lot better than average investors like you and me with all those connection, inside information, and top paid analysts. so they put out and get all of these cash. what they do with cash? Cash by itself don’t make money. so they offer you the 0% interest free credits like in credit card and such as promo for this period of time. this get them either more customers or smarter, re-fuel the cycle. people gets this “free” money and thinking hey, market is doing well, lets put free money into market and make some quick gain, then pay off credit card. hey look free money to invest and free returns at end. Well, just after you put your money into market, fueling a bubble that about to burst, you fell into the trap that commercial bankers had just nicely placed for you. the market goes down, now, not only your lost your investments, but also in the red, in fact, so deep in red, you now cannot even payback the loans that you took out on credit. So you begin to pay the high interest rate to the banks. ok. so at bottom of market curve, the fed cuts rate to stimulate the market, you find a lower rate and decided to pay the bank back its cash. and just in time, for the bank to reinvest this same pool money to catch the market on re-bounce, where you could of if you had the money. In the case you didn’t refinance, you still paying 24% for those credits to the bank.

 what’s learned? commercial banker makes money from investments when market goes up, makes money from burrower when market goes down, and get the cash back just in time to put it in and catch re-bounce. win win situation. Guess who is the fool? Man, I hate to be an average consumer. investment bank makes money, commercial banks makes money, hog like you and me get slaughtered. read, learn, absorb, think, don’t be a hog.