Banks are born to make money on the lending. It is in their blood. It is their business. The more they lend, the more they make. Pure and Simple.

So in subprime crisis,. they lent too much, for what they lent isnt their deposit, it was sold to the mortgage bond market.

Banks follows the principle, that the depositors are not their debtor, they are suckers. Banks get their deposit to lend out for the profit, they also use that to speculate. Your are theirs, theirs are theirs.

When you lend to them, you ask for no guaratee. When they lend to you, you have to have assets to back the borrowed money. That is unilateral relationship. Depositors bear all the risks. Smart!

Then borrowers hit back, they simply walk away from what they borrowed leaving worth less (worthless) guarateed property to the banks.

At this time, banks are not lending money, not unless the money is from someone else, namely, FNM and Freddi Mac. That is why there is no commercial lending to small businesses.That is why there is no private job growth but Census jobs.

One has to ask why banks are not lending? The answer are in either one or both of them:
1) They have better opportunities to make money
2) They have more bad debts to cover.

Which one is the reason? For GS, it is one - high frequency trading.
For small banks and some big banks, such as C, it is 2).

Good luck, business and investors,

Be all optimistic as you can. End of the day, who understand more of schemes are those in the safer camp.

And rest of folks, leverage as much as you wanted for the pity cash flow. :):)