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> Fractional reserve banking is a model of how banking works but it's a wrong model. [...] They try to attract deposits from other banks because they need enoug
by kgwgk 4y ago
> Fractional reserve banking is a model of how banking works but it's a wrong model. [...] They try to attract deposits from other banks because they need enough bank reserves
Not completely wrong, after all.
- mempko 4y agoIt's a useful model the same way a toy hotwheel is a model of a car. Yes they both have four wheels. Notice the issue that SVB had was a huge influx of deposits and not enough loans.
- mempko 4y agoUltimately it's the capital that the banks have that limit how much they can lend, not reserves. Their capital requirements are the limit. Once capital falls below a certain percentage, the bank is in trouble.