When I say The term Banks , it makes you feel Trusted , Reliable, Conservative while if I say Hedge Funds , you think of Greed Hungry Institution that are ruthless in the means and destructive to the Average Tax Payer. These Sentiments are so ingrained in us from Family value to Advertisements. While the Truth is Opposite , the biggest dangers to Society are the Institutions we dearly trust with a blind eye , "Banks". Let's first get Hedge Funds out of the way , Hedge Funds are surrounded in mystery , and thought of as secret organisations . While the Truth being that many are open than Banks , They are Individual/Private establishments such so that when one Blows up or goes bankrupt the taxpayer isn't to be concerned and is just the problem of the ones running it and no one else . Even with extreme Large Scale collapses like Long Term Capital Management which was over 3-7 Billion Dollars , the Government didn't interfere and just overlooked the burial of it. The Same cannot be said for Banks as they take are completely free to take risk as the know that if worst comes , the taxpayer will take the fall as the government will absorb the losses . This might seem like a worst case scenario but it happens more often than not, Bear Stern , Merrill Lynch are famous examples of banks losing sense of risk management. Hedge Funds tend to be more safe as their own capital is involved and no one else to blame for it if things go wrong. Banks in reality are more shady than you'd expect cause of 2 major points; 1) They hold public trust and can easily cook books and create reports that signify whatever results they want. Ex. Lehman Brothers , Bear Stern 2) The "Too Big To Fail" problem , since the 2008 financial crisis this problem has taken a bigger outlook , From Major Wallstreet banks to State banks in India , a few people manipulate them for there own gain so much so , that when the bank falls cause of its own error , the government has to come in and bail it out so that the public doesn't come under the weight of the losses . If you can see it , this is a major problem . Take in Example the relaxed way they give off loans / EMI's without heavily taking in account wether it could be paid back or not Ex. Nirav Modi , Vijay Mallya . Banks are more open to manipulation from the inside as well cause they can hide very easily behind the Complex Bureaucracy that they themselves create , same goes for the financial institutions they run under their own umbrella Ex. Yes Bank , DHFL , Merrily Lynch , UBS , and many more.
I will Continue this Topic in the Next Article "Why Are Banks Necessary and not a fraud".
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