A bank is a business. But unlike some businesses, banks don’t manufacture products
or extract natural resources from the earth. Banks sell financial services such as
car loans, home mortgage loans, business loans, checking accounts, credit card
services, certificates of deposit, and individual retirement accounts.
Some people go to banks in search of a safe place to keep their money. Others are
seeking to borrow money to buy a house or a car, start a business, expand a farm,
pay for college, or do other things that require borrowing money.
Where do banks get the money to lend? They get it from people who open accounts.
Banks act as go-betweens for people who save and people who want to borrow. If
savers didn’t put their money in banks, the banks would have little or no money to
lend. Your savings are combined with the savings of others to form a big pool of
money, and the bank uses that money to make loans. The money doesn’t belong to the
bank’s president, board of directors, or stockholders. It belongs to you and the
other depositors. That’s why bankers have a special obligation not to take big risks
when they make loans.
