What does the phrase “banks borrowing short and lending long” mean?

Question

What does the phrase “banks borrowing short and lending long” mean?

In: 39

Answer 1

to simplify it as much as possible without losing the main idea:

banks borrow money (from other banks, mostly) at very low interest rates to cover their day to day cash needs. these loans are very short term, usually only days or weeks in duration.

they lend money (to their customers) at higher interest rates to generate their profits. these loans are longer term, usually months or years in duration.