>> don't think this is accurate. Otherwise a bank could make a loan of $10,000 against a single dollar of savings; no reserve needed. The fraud capable without reserves would make the S&L debacle look tame by comparison.<<
It's true. I've ordered a lot of freebie publications from the Fed, and it's mentioned in many of them. Here is one I found quickly. I'll see if I can find something with more meat.
>>In practice, the connection between reserve requirements and money creation is not
nearly as strong as the exercise above would suggest. Reserve requirements apply
only to transaction accounts, which are components of M1, a narrowly defined
measure of money. Deposits that are components of M2 and M3 (but not M1),
such as savings accounts and time deposits, have no reserve requirements and
therefore can expand without regard to reserve levels. Furthermore, the Federal
Reserve operates in a way that permits banks to acquire the reserves they need to
meet their requirements from the money market, so long as they are willing to pay
the prevailing price (the federal funds rate) for borrowed reserves. Consequently,
reserve requirements currently play a relatively limited role in money creation in the
United States. <<
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