I didn't watch the video yet (at work)... but isn't it simply because they charge exorbitant interest rates on things, while giving a pittance in interest in return? I mean... they lend YOUR money out that YOU put into them and they make money on that. Then, when you borrow money, they make money on that as well.
Basically yes. But it also involves lending to the government and getting huge interest returns out of that sweet deal.
Except that isn't how it works- damn reality! This is just more "fool the fools" crap. Most people don't know crap about the Fed, the banking system, business or economics and this stuff appeals to the ignorant conspiracy nuts. And unfortunately there are a lot of them out there. Banks, by federal law, are required to maintain certain levels of capital so they can conduct business. Banks need capital (i.e. money) to conduct day to day business operations. You don't want to go to your bank to withdraw money and the money not be there because Sally and Joe were late paying their bills to your bank. The Federal Reserve is the lender of last resort to those banks. Banks are required to put up security for those loans and the loans are short term. The money banks obtain through the discount window is used for normal banking operations. So that when you write a check, the bank has enough money to cash it. It isn't used to invest in US Treasuries. And the interest rate the Fed charges member banks varies. Sometimes it is low, some times it is high depending on economic circumstances. But whatever rate it charges is entirely dependent on economic circumstances. If inflation is high, the interest rate will be high. If inflation is low, as it is now, the interest rate charged will be low. Reality is much less scandalous, but much more honest.
Agreed. I don't know why it is but there is MUCH more crap floating around about the Fed than there is about any other government agency I can think of. People just seem DETERMINED not to understand it. And it's actually so simple...
