50

No, they shut down over concerns of capital liquidity at the banks. One has to remember that individuals’ account balances, on deposit, are considered an on demand account payable of the institution, not an asset. The physical and notional currency (electronic fund transfers) in possession, balances on deposit with other financial institutions, securities held in accounts owned under the bank’s tax payer ID number, and loans (debt holdings) made to customers are the actual assets of the bank.

I have always found it funny that so many people think their money is physically setting in the vault at the bank, or credit union, In reality a large percentage is required to be on deposit with the federal reserve. more will be invested by the bank in short term instruments with other banks and investment houses, and a final amount will be held as loans made directly by the bank to customers. The vault is primarily for safe deposit boxes and holding the usually less than $200,000 of physical currency needed to facilitate cash withdraws (window exchanges and ATMs). And most of this is churn of the same physical pool of currency, cash deposits in, cash withdraws out, in the same week.

1 Like