Reply #9: First of all, the depositors DON'T lose their money! Every bank I know of

[napi21]

is insured by the FDIC. Not to sound callous, but if any depositor put in more than the insured amount of $100,000, they simply weren't paying attention!

Second, you are dealing with 2 separate contracts when you talk about depositors & borrowers. With the depositors, the bank contracts with them to be allowed to USE their money in exchange for getting paid "interest". Since all the banks pay into the FDIC fund, they can guarantee those depositors their money is safe.

With the borrowers, they sign a contract with the bank that they will be allowed to use the bank's deposited funds in exchange for paying "interest" to use it.

They are two different and distinct contracts, and are honored & enforced separately.