I had a nice little chuckle with your surprise that a bank can’t be real if it doesn’t do loans. I discussed with some friends recently how our current banking system is not the 0% risk that people assume it is. Let me ask you a simple question. Why were banks created in the first place? Was it an investment vehicle? Or a place to hold and protect your wealth? How about this one. Do you want your money where you tell your bank to put it or leveraged over and over again on residential and commercial loans in bubble markets? So far this year we have had 3 banks taken over by the FDIC. With the coming housing crash and following commercial market tank, do you really think we won’t lose any more banks?
The answer to your question about how the bank makes its money is through fees charged to customers like me. I pay a small fee for the investments I make just like a broker charges and for holding my deposits in their bank. I have no problem paying these fees in order to know that my money is sitting in their bank and not in a high rise condo project in Miami.
Opening a bank account like the one I did is for one main reason, wealth protection. I searched for the bank with the cleanest balance sheet and as little risk to financial turmoil. It will cost me a fee to have that protection but because of the size of the money I am moving there it is worth it to me. This isn’t necessary for every person.
For the person asking whether you have to go over there to open an account the answer is yes for the private banks.
I am not expecting large gains from this move. I think the short term outlook for the markets is negative and I will park liquid assets over there and wait for the right time to make my investments. Having a very safe 5% return on my investments for the next year is completely acceptable for me.
