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0 pointsericmay5y ago0 comments

They don’t lend out their customer’s savings directly per-se but you have to have deposits in order to have assets to lend against. Otherwise, why wouldn’t you be able to create a bank out of thin air and loan money? Customers cost money, why even have them?

I think what you missed in the article you linked is the concept of reserve requirements. What the person you’re responding to said is actually correct, again otherwise why wouldn’t a small regional bank be able to lend the same amount of money as JPMorgan Chase? The more deposits you have, the more you can lend.

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pintxo5y ago

Lending is tight to a banks equity. Prior to Basel II (early 2000s) this was some 8% per loan. So the more equity you have, the more loans you can provide. As small regional banks are unlikely to have the same amount of equity than JPMorgan Chase, they cannot provide the same amount of loans.

Under the followup regime (Basel III) its: https://en.wikipedia.org/wiki/Basel_III#Leverage_ratio

ergothus5y ago

> Customers cost money, why even have them?

That certainly seems to match the customer service attitudes I've seen from many banks...

0823498723498725y ago

looks like reserve requirements are currently 0% https://www.federalreserve.gov/monetarypolicy/reservereq.htm

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