They also borrow money in other ways, generally from other banks in what is called the interbank market. They make profits on the difference, called the margin or the spread, between interest paid and received. As this spread has been driven down by better information and the increasing sophistication of capital markets, banks have tried to boost their profits with fee businesses, such as selling mutual funds. The above statements include a material omission. Banks do not just take in money.
Banks create money.
In essence, they merely press some keys on a computer keyboard. The Economist s claim is demonstrably false. Banks have much more lenient even derelict reporting requirements than other companies. For example, banks alone are exempt from the Securities and Exchange Commission regulations that require publicly held companies to mark their balance sheets to market. Banks alone have been given the privilege of valuing their investments at historic cost rather than at market value.