From The Economist:
Pinch yourself. Much that could have gone wrong in the euro zone suddenly seems to be going right. Germany’s constitutional court in Karlsruhe has given the go-ahead for a new rescue fund. A banking union is taking shape…this builds on a recent pledge from the European Central Bank (ECB) to act to stop the break-up of the currency. Even angry talk of expelling the Greeks from the euro has died down.
And Europe is moving to becoming a federalist nation, at least for monetary purposes. With many more leaders calling for political federalism too.
Should we break out the Federalist Papers from John Jay, James Madison, and Alexander Hamilton in 1787?
Most people know the traditional banking model, if only from George Bailey in It’s A Wonderful Life.
In simplified form: A bank takes deposits from savers, and pays them a low interest rate. Then it lends that money out to borrowers at a higher interest rate. The bank’s profits come from the difference between the rates.
Charming…but far from the truth for the modern bank. An article from NPR’s Planet Money looked into JPMorgan Chase, the largest bank in America, and found they do much more than that.
The two most important ‘extra’ activities are charging fees and the outright investing of their own money. Here is how it breaks down:
- $48 billion – interest from loans
- $35 billion – fees
- $11.5 billion – trading
A little less than half of the bank’s revenue comes from non-traditional banking activities (fees, trading). Not so bad, especially with trading accounting for so little. Remember, one of the root causes of the financial crisis was all the big banks exploding their trading. When the market collapsed so did they, but were “too big to fail” and we had to bail them out.
Suffice it to say that banking with deposits and loans is very hard (George Bailey nearly went under), add in too much trading and banks become very unstable.
Did you know that America had an Export-Import Bank?
The Export-Import Bank of the United States (Ex-Im Bank) approved a $922 million loan guarantee to support the export of three satellites and related equipment to the Mexican government for the MEXSAT regional mobile satellite system. Mexico’s Secretariat of Communications and Transportation will purchase the satellites from Boeing Space and Intelligence Systems in El Segundo, Calif. Boeing will produce two satellites with mobile service satellite (MSS) capacity and will subcontract a third satellite with fixed service satellite (FSS) capacity from Orbital Sciences Corporation in Dulles, Va.
The three satellites will be used to deploy the MEXSAT system, a next-generation, space-based communications platform that will help support social and economic development within Mexico. Various sectors will benefit from MEXSAT, including programs focusing on education, health care, disaster relief and rural telephonic service.
Mexico is one of Ex-Im Bank’s nine key markets and accounted for $8.3 billion of the Bank’s worldwide credit exposure at the end of FY 2011. In FY 2012 to date, the Bank has authorized approximately $1.8 billion in financing for U.S. exports to Mexico.
Source: Embassy of the United States in Mexico