Comment: all of the banks that became

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all of the banks that became

all of the banks that became insolvent in the past 6 years were within reserve requirements. reserves are not capital and have nothing to do w/ solvency.

banks don't lend based on their reserve position. i could quote the Fed to that effect because they've stated it numerous times in the past couple of years. they have also been clear that there is no money multiplier effect from additional reserves.

but quoting the Fed doesn't prove the point as you seem to think.

my original point remains correct. there is no money multiplier effect. loans are issued based on creditworthy borrower + adequate regulatory capital. loans create deposits and the bank balance sheet expands on both sides by creating the loan and the deposit.

banks seek out reserves after the fact to keep up w the Fed's reserve requirements, and they acquire them in the market by borrowing reserves at the overnight rate.

if banks in aggregate need reserves they bid up the FFR, and the Fed engages in OMO to provision new reserves to hit their target.

they could also just reduce reserve requirements.

reserves are there to settle balances (clearing). vault cash (small subset of reserves) handle withdrawals.

reserves play no role in bank solvency.

reserves play no role in bank loan decisions.

excess reserves are not lent out. banks don't make loans just because they hold excess reserves.

the money multiplier is a myth.