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Are nonbank lenders still able to do the bank trick of money-creation?
by h4nkoslo 10y ago
Are nonbank lenders still able to do the bank trick of money-creation?
- bbgtpm 10y agoI don't think so. Money creation through loans by banks is vital to the proper functioning of the economy, but is tightly regulated by the Federal Reserve and various other agencies because unchecked lending has in the past resulted in sub-optimal outcomes. Without a banking charter, and hence access to a reserve account with the Fed, loans must be made from pre-existing capital.
- JumpCrisscross 10y agoAnyone can create money because credit creates money. The lower down you go (i.e. M3, M2, M1, M0) the more controlled the process is. But a private firm raising capital and signing term sheets, in a certain but very real sense, creates spending power.