Thanks for following up! Your point about capital requirements is well made. This is what I was hinting at (but did not explain) in my other comment here: http

Thanks for following up! Your point about capital requirements is well made. This is what I was hinting at (but did not explain) in my other comment here: https://news.ycombinator.com/item?id=24538786 https://news.ycombinator.com/item?id=24538786 > The obvious next question is: what, if any, mechanism > puts a limit on bank X's ability to lend? If it > considers a borrower credit-worthy for a $1 billion > unsecured loan, can it just make the loan, even if the > loan is much larger than the bank's existing balance > sheet? What will happen when the borrower tries to spend > some of the money with a customers of bank Y or Z? The answer is, of course, the capitalization requirements you described above mean that (i) no, it can't make arbitrarily large loans, and (ii) the bank should hopefully have enough liquid assets to satisfy redemption of demand deposits.