You are reading Economic Forces, a free weekly newsletter on economics, especially price theory, without the politics. You can support our newsletter by signing up here: One thing that banks do is serve as intermediaries between borrowers and lenders. Some people want to save. Some people want to borrow. Banks facilitate both by matching up these people. It is pretty straightforward. However, that part of what banks do isn’t really unique to banks. All financial firms do this to some extent. An insurance company collects premiums and uses those premiums to purchase a portfolio of assets, like bonds.