Why People Start Banks

John Mauldin:

"...for every $1 million in capital you have, you can lend out $10 million. The profit you make is the difference in the cost of your capital and money your borrow to lend and the interest rate you charge. If your are paying 4% for your money and charging 8%, you would make 4% times $10 million, or gross profits of $400,000. That is a return of 40% on invested capital, which is why so many small banks are being started all over the country every year. Nice business if you can get it."