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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: Elroy Jetson who wrote (97155)4/30/2009 10:35:46 AM
From: rich evans  Read Replies (3) of 116555
 
It seems there are two principles allowing banks to loan beyond there cash. Fractional reserve rules require 10% of loans to be held in cash at the Fed Reserve? Is that correct? I thought the rules required 10% of all demand deposits to be held in cash at FED also?

Then their are the Fed or Basal Bank rules on how much capital a bank must have as a percent of their total loans (assets) outstanding. This I thought was 5.5%. So this would limit the loans a bank could make. Not sure about the types of capital requirement. Preferred stock is more like a debt if dividends are mandatory or cumulative.

Some of these discussions are an apples and oranges talk with one talking about capital requirements and another talking about fractional reserve requirements.
Rich
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