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But consider that tier 1 capital ratios are on the order of 10%, so they're leveraging the deposits many times over. Further, they're probably not reinvesting

by 3am 15y ago

But consider that tier 1 capital ratios are on the order of 10%, so they're leveraging the deposits many times over. Further, they're probably not reinvesting the deposits in treasuries, but rather making commercial or personal loans at more than 4% (minus what they pay out in interest on the checking, which if it's anything like mine is more of an insult than an incentive). So it would probably yield closer to $40K before taking into account loan default risks and other costs. The other post saying this is about the Durbin amendment to the Dodd-Frank bill is probably much closer to the truth. You also have to take into account (JPM-Chase's CEO) Jamie Dimon's extremely vocal position on the bill.

JumpCrisscross 15y ago
As of FYE 2011 US banks with more than $1B in deposits had a net loans/leases to total deposits ratio of 71% [1]. Tier 1 capital is less a measure of leverage from a systemic level as it is of bank stability. Your basic point, that we must account for leverage, is correct in its assertion but not intensity. (No worries - there is no pride in having spent years learning to pry apart financial institutions). [1] http://www2.fdic.gov/sdi/main.asp http://www2.fdic.gov/sdi/main.asp (A&L)