Who controls the FED?

[loik]

Quote from Vinny1:

So if a bank has say $100,000 in deposits, it can lend out $1 million. If only $900,000 is paid back, are the $100,000 in deposits lost? What if only $800,000 is paid back? Is the $100,000 on deposit lost and then the bank files for bankruptcy?

interest

 

[FireWalker]

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[euclid]

Quote from Vinny1:

So if a bank has say $100,000 in deposits, it can lend out $1 million. If only $900,000 is paid back, are the $100,000 in deposits lost? What if only $800,000 is paid back? Is the $100,000 on deposit lost and then the bank files for bankruptcy?

This is obviously nonsense. Banks must balance their books.

If fractional reserve requirement is 10%, then the bank must maintain 10% of deposits in reserve. It can lend out the other 90%. So if bank has $100,000 in deposits, it can lend out $90,000 of those deposits. If it wants to lend more, it needs to get it from somewhere which is why banks borrow from each other and from the Central Bank.