Toddsterpatriot
Diamond Member
Bullshit! - About 10 banks per year fail insolvent from lack of deposits. Traditional banks had a 10% reserve while shadow banks leverage below 3% including finance companies, asset-backed commercial paper (ABCP) conduits, structured investment vehicles (SIVs), credit hedge funds, money market mutual funds, securities lenders, limited-purpose finance companies (LPFCs), and the government-sponsored enterprises (GSEs).
When a bank lends money, it becomes a deposit in another account that they lend again into another account & so on again, again & again in an endless loop.
Banks also sell or borrow against loans to create additional loans. This is why Bush had to bailout Wallstreet. Freddie Mac had a leverage ratio of about 70:1. Lehman Brothers was leverage at 44:1 before it became insolvent. Currently US Bancorp is leveraged at 15:1.
About 10 banks per year fail insolvent from lack of deposits.
If they could lend $10 for every $1 in deposits, how can they fail?
When a bank lends money, it becomes a deposit in another account that they lend again into another account & so on again, again & again in an endless loop.
Your original claim was wrong? DURR
Freddie Mac had a leverage ratio of about 70:1.
Explain your understanding of what that means. I'm happy to clear up your confusion again.