Mutualfunds.com has an informative article about little known "Securities Lending" by mutual fund companies. The article helps explain how Fidelity is able to offer two total market index funds with zero expense ratios. Vanguard is mentioned thusly:
For those interested, this is a link to the full article:Mutual fund sponsor Vanguard gives 100% of its fees generated from securities lending back to its shareholders. This is one of the main reasons why Vanguard is able to offer rock-bottom expense ratios. In some cases, fees from securities lending pays for virtually all of the mutual fund’s operating costs.
http://mutualfunds.com/education/mutual ... y-lending/