Easiest Way to Make A Billion

From Business Insider: 

STEP 1: Form a bank.

STEP 2: Round up a bunch of unemployed friends to be “bankers.”

STEP 3: Raise $1 billion of equity.  (This is the only tricky step. And it’s not that tricky.  See below.*)

STEP 4: Borrow $9 billion from the Fed at an annual cost of 0.25%.

STEP 5: Buy $10 billion of 30-year Treasuries paying 4.45%

STEP 6: Sit back and watch the cash flow in.

STEP 7: Go public.   After bonuses, your bank will be earning about $200 million a year, your capital ratio will be super-strong (10% equity-to-debt!), and your balance sheet will be clean as a whistle (all risk-free Treasuries!).  So you ought to be able to persuade investors to pay you at least 20-times earnings, or a valuation of $4 billion.  Sell 25% of the company for $1 billion.

STEP 8: Use your $1 billion of new equity to borrow another $9 billion at 0.25% from the Fed.  Buy another $9 billion of Treasuries.  Collect another $400 million a year.  Pay yourself and your team bonuses that are twice as large as last year’s.  You deserve it!  And you’re now about $500 million to the good.

STEP 9: Wait for your stock to double or triple, which won’t take long given your amazing growth trajectory and clean balance sheet.  When your market cap hits $10 billion, sell another 10% of the company for $1 billion.  Now you’re really ready to grow.

STEP 10: If you want to get fancy and get nice profiles written about you in business magazines, start buying branch networks from defunct banks (the FDIC will pay you to take them) and start making actualloans.  Also, start hiring trading desks to gamble on things more exotic than Treasuries.  Yes, all this sounds risky, but just remember–the risk isn’t yours, and you’re already $500 million to the good. 

STEP 11: Sell $500 million of your stock to a “strategic investor” and let the rest ride.  Don’t worry, if your traders and loan officers turn out to be idiots or the Fed suddenly raises rates, the taxpayers will handle it.  And you’ve already made your $1 billion.