No, this is actually wrong. While they can do this, they don't in practice because of competing banks. If that 33.33 dollar check goes into a competing bank, t

No, this is actually wrong. While they can do this, they don't in practice because of competing banks. If that 33.33 dollar check goes into a competing bank, that competing bank, by virtue of being a rival/competitor, is going to immediately go back to the lending bank and demand the IOU in cash. If the lending bank has only $10 in reserve then they can't pay back the $33.33. So instead, due to necessity, the bank will only lend out $7. What you are describing is fractional reserve banking under a SINGLE or central bank. The United States Federal Reserve does this kind of lending to commercial banks deliberately to control the money supply. Actually, I'm not even sure if the federal reserve is required to maintain a reserve ratio (of federal notes to cash) at all. I think those federal reserve notes are literally created out of thin air.