Why is the financial services industry so obscenely lucrative and why are the most powerful players involved in it. There are undoubtedly multitudes of reasons but here is at least one: Currently the reported Federal Funds Rate range is between 0.00 % and 0.25% and has not changed much since January 2009 while the Prime rate has been at 3.25% for the same period. Historically average actual lending rates vary but are generally over 1 point above prime rates. This gives the banks a spread of about 4 points. Outside of the illicit drug trade there is probably no other business that offers a 400% return. What is even a sweeter deal, we, the depositing public, lend the money to the banks to make these sick profits. Check your savings and CD rates and see if you are getting anything more than a paltry 0.25 or 0.30%. 'That' is "their" cost of borrowing. And when these geniuses lose money due to excessive greed, such as chasing subprime loans so they can lend at 15% and 20%, we, the taxpayers have to bail them out. LINK
Let us face it. Who are you going to blame? The politicians and big business, for a long time, have been operating a Barnum and Bailey circus and, we, the public are standing in line to be accepted as clowns. Every time I go to the bank, which is not often, upon leaving I hear this sound from the bank's executive board room “sssuckerrrrr” accompanied with loud laughter.