[quote=bubba99]Leave us not forget that the fed is lending to banks for day to day operations at 0% to 0.5%. The banks are lending that money out at 10% to 30%. Any idiot could earn on that point spread.
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Yeah, but… first, banks can’t fund their operations with fed funds alone, and second, only a small part of any bank’s loan portfolio is yielding between 10% and 30%. The average cost of funds for banks right now is about 2.25%, and the average yield on assets is around 6%. So, that’s a 375 bp spread before operating expenses, credit costs and taxes. Clearly, not “any idiot” can make money under these conditions, and many of them are not.
