How Banks Make Money (It's Not What You Think). Have you ever thought about what happens to your money when you deposit your money at the local bank? Or have you ever asked the question, "How do banks make money to stay profitable?" Well in this video I am going to explain to you guys how the banking system works, what central banking is, how the federal reserve plays a part, and how the banking system is set up to benefit the banks......and only the banks! 0:00 Intro 0:55 The first way banks make money 2:00 The big daddy of central banking (the Federal Reserve) 3:37 The reserve requirement and how banks make money 6:00 What happens when changing the reserve requirement 7:05 When banks borrow from other banks 10:35 How banks make the most profit Why A Mortgage Loan Is A SCAM & A Secret To Mortgage Payoff https://www.youtube.com/watch?v=tFSRd_ZQx84 How to pay off a 30 year home mortgage in 5-7 years (2021) https://www.youtube.com/watch?v=eGVn9iq1e6c&t=1334s This is an age old question for some, how DO banks make money. And the way that banks make money starts with YOU! Yes you, when you deposit your money you are literally giving the bank a zero interest loan to go ahead and borrow it out at a certain percentage dictated by the federal reserve. Deposits are possibly the most important asset to their business as it IS a loan that the banks do not pay interest on at all. And to offset banks ability to loan all of their, I mean YOUR money out, is a reserve requirement set by the federal reserve bank. Now the reserve requirement is usually around 10%. So if you make a hundered dollar deposit at your local bank, they have the right to use 90% of that $100 to lend out in the form of mortgages, car loans, personal loans, or any other loan type product. So not only do they have the ability to lend out the money that their customers deposit, they only have to keep 10% of it on hand. BUT they can also lend it out to another bank! So banks really just have their own ecosystem of moving money, but it's technically not their money, it's yours, but they use it to make money on your money..... Now another way banks make money involves Wall Street and mortgage back securities. So what banks will do, is lend out mortgages to people looking to buy homes. But eventually those mortgages will be packaged up and sold to Wall Street investment banks. These packages are called mortgage backed securities. Mortgage backed securities are sold to Wall Street investors which fall into 401k's and retirement accounts. That's why the crash in 2008 really hurt everyone because a lot of people had their money in 401k retirement accounts that were invested in mortgage backed securities. So along with loosing their homes maybe, they also lost their retirements because they lost their home....it's really messed up when you think about it. Then this bring us to our next concept of banking. The interest rate set by the federal reserve is NOT made for consumers, but banks to borrow from the fed. The central banking system sets the rules for the interest rates that regular banks borrow at. So when you hear a 0% interest rate, it's not made for us....it's made for the banks who borrow from the fed. So last year we saw mortgage interest rates fall because of the 0% interest rate. 😃 Thanks for Subscribing & Liking our Video! 📧 ⌨️ FREE 7 Day Trial To PropStream Real Estate Investing Software: http://reisoftware.thekwakbrothers.com 📊 Pay Off Your Mortgage In 5-7 Years (On Average): https://www.youtube.com/watch?v=eGVn9iq1e6c 💻 JOIN OUR FREE FACEBOOK GROUP FOR LANDLORDS & PASSIVE INCOME: https://www.facebook.com/groups/bestreigroup 📡 PROTECT YOUR ONLINE DATA AND ACTIVITY WHILE CLOSING DEALS AND GENERATING NEW LEADS WITH NORDVPN: https://go.nordvpn.net/aff_c?offer_id=15&aff_id=40858 🔊 Our Podcast: 🔹Spotify: https://open.spotify.com/show/7pnHJSNl7vPVFzq69IzC6B 🔹iTunes: https://podcasts.apple.com/us/podcast/first-deal-experience/id1282240923 📧 Hire the Kwak Brothers to Speak: info@thekwakbrothers.com #federalreserve #thefed #banks ======================== ---DISCLAIMER--- The suggestions, advice, and/or opinions that are given by Sam Kwak (The Kwak Brothers) are simply opinions. There are no guarantees of set outcomes. Listeners, guests, and attendees are advised to always consult with attorneys, accountants, and other licensed professionals when doing a real estate investment transaction. Listeners, guests, and attendees are to hold Sam Kwak, Novo Elite, Inc. and the Kwak Brothers brand harmless from any liabilities and claims. Not all deals will guarantee any profit or benefits. Listeners, guests, and attendees are to view and listen to all materials and contents furnished by the Kwak Brothers as a perspective based upon experience.