Quote:Banks borrow
Quote:
Banks borrow short-term, on the wholesale markets, and lend long-term (Northern Rock got about 70 per cent of its funding from the wholesale market and repackaged it in the form of high-risk mortgage loans). The difference between the rates a bank pays and the rates a bank charges is its profit. (Oiliver Kamm in today's Times).
Actually, more accurarely, it's the source of a bank's income, of which profit is only one part (wages and other expenses have to come out of it too). Still, there's no nonsense here about banks creating the money they lend out of thin air. As Kamm says, they have to get it in the first place.