On Wed, Apr 11, 2007 at 12:23:17AM -0400, Charles Brown wrote: > > Does a private equity group make money by collecting interest ? Are > mortgages a big part of how banks ( or finance companies, whatever) make > their money ?
The buy up companies, taking their stock off the market, often for little relatively money paying for their purchases by having the company take on debt. They pay themselves huge fees for this service, then sell stock for this debt-laden company to the public at a great profit. The banks tend to package their mortgages to resell them to the public. They earn their profits by taking fees for their service. The pension fund or insurance company that buys up these packages can earn very high interest rates on the most risky part of the package, but they -- not the banks -- bear the risk. > > Does the finance sector dominate the economy today in a way that did not in > the past ? -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu michaelperelman.wordpress.com
