Make the Shift—Bank Local

Great video. Congratulations, Kelley et al.

Philip

I apologize for the confusion. Here is the second half to my previous comment. The response is limited to 3000 characters.

Bank capital is what banks need to cover loan losses. It is when banks started investing their capital in exotic investments or even in supposedly secure investments such as subprime mortgages, that they started getting in trouble. They did not have enough of their own investors or stockholders capital to cover the loans that defaulted because the value of their capital declined as the market did. This is why so much attention is being given to try to restrict banks in how much capital they need to hold in reserve and in what form it should be in. This is what banks refer to as Tier 1 or 2 types of capital requirements.

Regarding deposits, if everyone transferred their money to one bank, the bank would be faced with enormous liabilities trying to generate enough revenue to pay depositors interest on their deposits.Their only source of revenue would be issue more more new money in the form of loans. Banks basically make profit based on the difference that they pay depositors and the interests they collect on loans.
The best thing people can do to help their local community bank is to give them their loan business. Loans plus deposits will increase local profits which will stay within the local community, provided owners of the bank keep their money local. Deposits without loans can be harmful to banks.

There is a great deal of published misinformation out there about how the banking system works so don't feel bad about your description. The key about your effort is try to get people to keep their borrowing and banking as local as possible is still valid, until we develop a new monetary system that is not dependent upon more debt to keep the system working.

Mike Krajovic

Peaceful Economics &
Uplifting Humanity