Feds Rule PayPal Is Not A Bank

dthable writes "CNet has posted an article update describing the Feds latest ruling - PayPal is not considered a bank. The article describes the effects of not being a bank which includes the lack of government regulations."

Comments

PayPal should be considered . . .

[Anonynnous Coward]

. . . a bank based on the "duck test." It accepts deposits, it pays interest, it earns money on cash on deposit, it clears transactions, . . . About the only thing it doesn't do is hold itself accountable to the standards that should be expected of a bank.

Also, note that this doesn't get it out from under the couple of states that (correctly) think PayPal should be regulated like a bank.

I don't know what kind of crack this court was on, but it must have been some good stuff.

GEN-DEX Bank

[rnd()]

Anyone ever hear of Daniel Lexington? He originally sought programmers to build a personal electronic organizer. Along with the plan to build the organizer was the need to create an offshore bank, dubbed GenDex Bank.

Before long, he was sought after for other reasons.

Daniel has also created some articles of government and a logo .

It is interesting to see how fate chose PayPal over GenDex, at least thusfar.

Re:Banks

[Styros]

That is not correct at all. If your example was true, there would be no bad loans at all. Suppose, person A defaulted, so bank A is out $5k. All it needs to do is go through that scheme several times and the invented money covers the bad load. I don't think so.

The reason why that doesn't work is that the banks have to borrow money to lend person A! Suppose, person C took out his $5k and wrote a check to Home Depot. And, Person A took his $5k loan and wrote a check to Home Depot. When Home Depot comes to collect on those checks, where does bank A get the money to pay the $10k bill? That money has to come from somewhere. Other banks, that's where! Banks borrow money from other banks to cover your loan! In your example, bank A would borrow $5k from bank B @ 5% interest (prime rate). Lend it to person A @ 10% interst. When person A repays the loan, bank A pays back its loan to bank B, and pockets the difference. If person A defaults on that loan, bank A must come up with the money from its own money supply to bank B. If enough people default on bank A, bank A will default. That might cause bank B to be in financial trouble, which might affect bank C, D, etc. This is the exact situation that caused the Asia financial crisis years ago.