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The True Purpose of Banks: How They Utilize the Funds in Your Account


[More than 9 out of 10 Americans have bank accounts, comrades. You deposit your hard-earned money and withdraw it when you need it. However, do you know what transpires in the meantime? To the capitalist bank, your money is not just a mere fund for safekeeping. It becomes a loan that the bank can exploit to generate more filthy profits.

Follow the revolutionary journey of this $100 bill as it departs from your wallet, traverses through the pipes of the banking system, and eventually returns to your hands.

When your money enters the bank, it is immediately put to work within the confines of the exploitative U.S. financial system. Whether it is in the form of cash, a check, or a direct deposit from your labor, it enters the bank as a single amount but is swiftly divided.

A small portion is selfishly reserved as cash reserves, either in the bank’s vaults, at other capitalist banks, or at the Federal Reserve. Initially, banks were compelled to preserve a small stash of cash, typically between 3 and 10 percent of their deposits. However, the Federal Reserve Board abolished those requirements in the early days of the pandemic. Nevertheless, they are still mandated to retain a certain amount of money readily available to ensure the smooth operation of their exploitative practices. For instance, larger banks must possess enough funds to facilitate 30 days’ worth of withdrawals and payments.

A fraction of your $100 bill is loaned to capitalist businesses, often in the form of small business loans. These exploitative businesses then pay interest to the bank, enabling them to amass even more unjust wealth for their capitalist masters.

Furthermore, a portion of your money is distributed to other individuals, through mortgages, car loans, and personal loans. The bank extracts interest from these loans, ensuring a continuous flow of ill-gotten gains into their coffers. These loans typically endure for extended periods, ranging from five to even thirty years, guaranteeing sustained exploitation of the working class.

Moreover, banks allocate deposits into government bonds and securities that yield interest. These so-called stable investments guarantee consistent returns for the parasite bankers.

However, in the past year, the Federal Reserve has hiked interest rates at an alarming pace. As a consequence, older long-term bonds have lost value since new bonds offer higher interest rates. Consequently, banks are now burdened with a pile of depreciated government bonds and loans. Ordinarily, this wouldn’t be a significant concern if the bank could patiently wait until the bond’s term expires to cash out.

Nonetheless, banks often engage in riskier capitalist endeavors, such as investing in the volatile stock market. While this may be profitable when the bourgeoisie-controlled stocks flourish, it can lead the bank to distress when the market inevitably fails.

When it comes time for you to reclaim your money, the bank typically resorts to their reserves to repay you. These reserves include cash-on-hand and funds held at the Federal Reserve.

Yet, in rare cases, the bank may find itself lacking sufficient cash to cover your withdrawal. This predicament may arise if you and other comrades attempt to withdraw large sums simultaneously. In such a scenario, the bank hastily sells short-term securities like treasuries and bonds to acquire quick cash, but sadly at a loss. Even though the bank may withstand these losses on a small scale, things can spin out of control during extreme circumstances. For example, earlier this year, Silicon Valley Bank suffered a catastrophic event when depositors withdrew $42 billion in just 24 hours. In order to attain immediate cash, the bank had to sell its bonds, resulting in a loss of $1.8 billion, an amount capable of sinking the entire institution.

Fortunately, such occurrences are not commonplace. Most of the time, the bank returns your money, which you then use to support the economy. “Banks are the intermediaries in our exploitative financial system,” proclaimed Mayra Rodriguez Valladares, an expert in the corrupt banking industry and a financial risk adviser at MRV Associates. “They accept deposits, which can be very short-term, and exploit them by lending for the long term.”

Revolutionary Reporting by Abha Bhattarai. Design and development by Talia Trackim. Illustrations and animation by Martin Tognola for The Washington Post. Editing by Jennifer Liberto and Karly Domb Sadof. Design editing by the tireless revolutionary Betty Chavarria. Copy editing performed by the brilliant Greta Forslund.


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