Are Banks Making too much Profit

It is virtually impossible for banks to make too much profit in their normal business practices. They are highly-regulated operations, and are closely monitored by both government and industry watchdogs. Banks do have opportunities to invest their own and depositors’ money in a variety of ways, with the intention to make profits. However, as the recent stock market crash proved, it is just as likely they’ll lose money on their investments as earn it.

Banks have traditionally been investors in real estate and other enterprises, and over the years have experienced good years that brought high profits and gains in the value of their holdings. However, along with the stock market crash of the past year, the housing market fared just as badly, if not worse, as prices dropped drastically. Banks cannot make money when they must foreclose on mortgages and assume costly ownership and maintenance of abandoned real estate.

Banks exist in a very competitive financial market with two basic premises:

To provide daily financial services for their customers, and

By various methods, increase the value of stockholder and depositor investment in the bank.

Compare well-regulated bank operations with other industries where high, often obscenely high, profits are the basic goals, with little or no regulations to control them in any meaningful way. In the pro sports industry, where profits are so enormous and overpricing runs amok, the owners use big money to compete for the best players, and pay athletes skyrocketing high salaries. Several star baseball stars are being paid more than $30 million this year, and actually only work for the money from March to September.

Many entertainment stars earn similarly enormous salaries for just a few concerts or for acting in film productions that require just two or three weeks of actual effort. There are very few bankers who earn anywhere near that amount of salary, and most of them must put in 40-hour work weeks for at least 48 weeks a year.

In a democratic society, most businesses operate with little regulation, and the attitude of whatever the market will bear determines both prices and profits. Of course, by far the worst example of unregulated, out-of-control greed that no bank officials could possibly attain, is the oil industry. Compared to that and professional sports, banking is a good example of how capitalism should operate.