Lets say you have 100'000.-. You lend it to someone at an a rate of 10% a year. You get 10'000.- a year... you can't live of that...

so,

you issue bonds worth 100'000 with the loan as a security. You pay 7% interest to the bond holders a year... you are left with 100'000.- from the bonds and a 3% interest (10%-7%): 3'000.- a year.... you can't live on that....

So,

You lend the 100'000 from the bonds to someone, again for 10% interest. You are now receiving 13%: 13'000 a year.

you do this over and over, a total of 100 times... now you receive 300'000.- a year... you can live of that

i hate bank's! ok, this is a very simple version of what banks do and yes there are restrictions as to the leverage as well as risk implications but still this shows the rediculous amount of money financial institutions suck out! Same goes for leasing companies (for car leases etc), morgage companies etc.