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PaperclipPerfector  1yr ago (text post)   3437 thread views

Small-Scale Question Sunday for July 16, 2023

Do you have a dumb question that you're kind of embarrassed to ask in the main thread? Is there something you're just not sure about?

This is your opportunity to ask questions. No question too simple or too silly.

Culture war topics are accepted, and proposals for a better intro post are appreciated.

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Why would banks not be interested if venture capital has a positive return?

Banks can't take risks like that because if they fail they lose depositors money, not just their own. Without FDIC insurance that would mean a bunch of people losing their life savings even though they didn't personally make risky investments. There are regulations to prevent banks from making risky investments.

If venture capital takes that risk and fails it doesn't create wider problems to the financial system. Only the firm and possibly a few individuals go bankrupt.

The lack of very wealthy people implies that venture capital does not have large positive return.

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