banking and finance

both banks and financial institutions are earning from other people's money. banks pool funds from depositors and lends them to businesses and individuals who are qualified for financing. let's just say, if you are a depositor of a certain bank, the banks owe you money. you lend them your money and they lend them to others. the banks have to give a certain percentage to the Reserve (federal reserve or whatever they call it) as like the name said, RESERVE. that's why they have insurance. your money is insured up to a certain amount. financial institutions pool funds from investors to then participate to stock market or other securities like bonds, money markets, shares, etc. they earn if the stock, shares, bonds, money markets, etc. increase their market value but unlike banks, your money is not insured. you have to acquire the risk of your investment or to some extent.. lose your investments totally! :)