How Do Big Banks Record Profits in a Recession?

[Guest Eric]

How do banks come to make so much money in economic hard times? I just got my credit card reduced after I payed it off. People tell me it happening to everyone. So if they are reducing lending, then how are they making money.

 

Are they laundering money from Drug Cartels? Are they making secret deals with the Chinese? I just want to know. Thanks

[Guest Pantheon]

No one knows. There is no supervision to tell us.

[Guest Fedup]

The banks borrowed money from the Federal Reserve at low interest and use it to Market trade or buy U.S. treasuries at a higher interest rate. The Dow rebounded a record 25% last year. This allowed banks to generate huge profits. The value of everything was so low at first. If you had money then you could make undreamed profits. But, the common individual lost everything, so only a few benefited from this opportunity.

 

In principle, the banks are supposed to use the borrowed monies from the Federal Reserve and lend it out to people like you Eric and businesses across the country. This is a major problem that is still not resolved.

 

Money laundering is not far off as well. There is so much offshore hedging going on it makes Vegas look boring.

[Guest Literati]

How did the big banks come to make so much money in economic hard times? I just got my credit card reduced after I payed it off. People tell me it happening to everyone. So if they are reducing lending, then how are they making money.

 

Are they laundering money from Drug Cartels? Are they making secret deals with the Chinese? I just want to know. Thanks

 

You just got your answer. I love it when people can figure out puzzles.

 

http://www.bloomberg.com/news/2010-06-29/banks-financing-mexico-s-drug-cartels-admitted-in-wells-fargo-s-u-s-deal.html

 

The smugglers had bought the DC-9 with laundered funds they transferred through two of the biggest banks in the U.S.: Wachovia Corp. and Bank of America Corp., Bloomberg Markets magazine reports in its August 2010 issue.

 

This was no isolated incident. Wachovia, it turns out, had made a habit of helping move money for Mexican drug smugglers. Wells Fargo & Co., which bought Wachovia in 2008, has admitted in court that its unit failed to monitor and report suspected money laundering by narcotics traffickers -- including the cash used to buy four planes that shipped a total of 22 tons of cocaine.