> But it's not 'as they wish' as you say, depending on where they operate, they are typically constrained by capital and liquidity ratios set by their regulator.
Okay! Then why don't families and individuals have an equivalent mechanism? Set capital and liquidity ratios by law. E.g.: if you have 10k$ on hand, you can create 100k$ of liabilities. If you have 10k$ on hand and 50$k in medium-risk investments, you can create 300k$ of liabilities, and buy a house that way. Something along those lines.
Of course, since ordinary people can't do that, they need to go to middlemen: the very banks who can do that x) Doesn't strike me as very fair.
Technically speaking, you can do this. For example you could create a private VC firm and convince people to give you their money. You could then "loan" that money to a start-up. That start-up would then pay its employees with the money who could re-invest it with you. You take that money and "loan" it to another start-up. Voila, you've created capital.
As soon as you start taking other people's money you are subject to a ton of regulations for limiting fraud. In the above example if you took the funds and bought a house you'd be potentially guilty of fraud.
Okay! Then why don't families and individuals have an equivalent mechanism? Set capital and liquidity ratios by law. E.g.: if you have 10k$ on hand, you can create 100k$ of liabilities. If you have 10k$ on hand and 50$k in medium-risk investments, you can create 300k$ of liabilities, and buy a house that way. Something along those lines.
Of course, since ordinary people can't do that, they need to go to middlemen: the very banks who can do that x) Doesn't strike me as very fair.