How To Build A Stable Bank Charlie Munger Style

The recent volatility in the financial sector is a reminder that the banking sector is not, nor has it ever been, a safe place to invest.

Using borrowing or leverage in any business always increases the risk of failure, but banks' entire business model depends on leverage.

Fractional-reserve banking, where only a fraction of a bank's deposits are available for withdrawal at any point, is a very aggressive form of leverage.

Q4 2022 hedge fund letters, conferences and more

However, fractional-reserve banking has been fundamentally important to the growth of the global economy. It's entirely safe if used sensibly. Unfortunately, lenders are not sensible. They take excessive risks or pile more leverage...