How the banks make money?

The mainstream textbook argument goes like this: taking deposits and giving loans to individuals/enterprises of good credit standing, earning interest spread plus fees charged for various services provided.

After the financial crisis, one may highlight the importance of staying sober  and conservative while the crowd goes crazy in credit bubbles…

Really? Finally we’re learning from the history?

What about Keynes’ famous “The market can remain irrational longer than you can stay solvent”?

The way for the banks to make money, to compete in the markets, to attract  talents with high pay and bonus, to survive and thrive, thus, is to join the crazy crowd, ride the bubbles, yet on constant alert so that they can get out just before everybody else wakes up from the drunk party…

Just like what the great and much revered Goldman Sachs did before the  crisis: betting against the subprime CDOs (should i mention it also kept selling those CDOs to its clients?).

The rule changed, it’s not about who can stay longer in the game anymore, but  who can grow huge and influential fast enough so that even if you blow up, you can still walk away with more chips (your own savings during good times or bailout money) than those conservative & “principled” tiny players.

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