About a month ago, TD Bank (TD.TO)(TD) was caught doing naughty things. They have been accused of pushing employees selling products clients don’t really need A bank pushing product sales? Nah, never gonna happen, right?
To be honest, I laughed when I read that news. Many journalists jumped on this story and explain the world all banks are evil and tries to make money from clients… Well, this is pretty much the concept of a bank; in fact, we want them to make money.
Why it’s a good thing banks make money
For those who are still frustrated because they pay fees or because their bank manager refused them for a loan, I can tell you; banks are your friend and you want them to make money. What? We should be happy banks make money? Yup, you read it right.
What is important to understand is that banks are the heart of our system called capitalism. This is not just an analogy, banks are really the heart pumping liquidity in our system. Without banks facilitating money flows, nothing happens. We had a brief example of what the world could look like without banks during the 2008 credit crisis. The day banks decided not to trust each other and stop lending overnight money, Governments of the world went ballistic! When the money stop flowing from one hand to another, the whole world stop. The thing is that capitalism is based on trust we have in our economy and in the strength of our currency. Such beliefs are mainly supported by banks, the ultimate institution, and guardian of the greater good… all right, I’m exaggerating here! Hahaha!
But the truth is that we want banks to make strong profit. The more money they make, the more they allow money to flow in the economy. When banks are reluctant to lend money, we see companies not hiring or not investing in productivity. We see people not buying houses because they can’t get a mortgage (some people should definitely not get one thought…). When banks stop pumping money into the system, the whole world suffer. You don’t get the raise or the job you deserve, you can’t buy the things you want and the store next door closes because he can’t afford doing business anymore.
