Chapter 38: How Banks Make Chains

“You can have your people go to a bank and try applying for a loan. Study their process, copy their loan documents, then add a few extra clauses.”

He glanced at Mr. Fox beside him. “For example, after a fixed period, the borrower forfeits the collateral but still has to repay the full principal and interest. That lets you lower the interest rate on paper.”

This was simply a variation on the banks’ usual game. When someone borrowed from a bank and could not repay the debt on time, the bank would send the collateral to auction.

The proceeds from the auction would always go toward the borrower’s unpaid debt. On the surface, it looked like a perfectly reasonable process. In truth, it was not.

Because from the very beginning, the bank valued the collateral very low, while the interest was quite high. Most people who needed loans were not actually capable of repaying them in the short term.

The logic was simple. If those people could raise that money within a month or two, they would not have needed to borrow from a bank in the first place.

Since they could not raise that money, they naturally could not repay the bank loan either. Then the bank could openly swallow the collateral.

If the borrower could repay the money quickly, the bank still had not made a bad deal. It had earned interest in a very short time.

That amount might not look like much in a single transaction, perhaps only a few percent to around ten percent of one hundred dollars. But once all of a bank’s business was piled together, it was no longer one hundred dollars. It might be ten million, a hundred million, or even more.

William’s suggestion merely added one clause after the bank-style termination: continued recovery of principal and interest.

In reality, even with banks, the matter never truly ended there. They had plenty of ways to eat the borrower down to the bones.

Banks might not have the same universally bad press as finance companies like Mr. Fox’s, but at their core, banks were no saints either. Every legal policy defining the boundaries of illegal money was based on the banks’ own highest standards. They were not only the athletes, but the referees too.

The people Mr. Fox had mentioned earlier, the ones who did not want to see their business legitimized, were the legislators tied to banks and syndicates.

Banks and syndicates fed them and their families, perhaps even their private staffs, and maintained their respectable lives. Naturally, they had to learn to speak up for the masters who fed them.