Banks. How do they work?

Discussion in 'The Okie Corral' started by PatinAz, May 30, 2020.

  1. PatinAz

    PatinAz

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    Ok, I know nothing of the banking industry. All I know is every two weeks I log into my bank website and see numbers there, given by direct deposit from my employer. Over the course of two weeks I use a plastic card and those numbers go down. Rinse and repeat.

    If I wanted, I could go down to that bank every two weeks and get that paycheck cashed out to me. No bid deal. But what if I had, say, $50k or $100k in a savings account. Could I go down saturday morning and get all that in cash if I wanted? Could 20 other people do the same?

    What if everyone who banked at XYZ bank decided one day they wanted to go down and cash out everything they had in that bank; some with a few hundred, some with a few thousand, some with 10's of thousands. Could that happen?

    I log onto a Zelle app on my smartphone, and with a few clicks and drags, $500 from my bank, which I could have gone down to cash out, goes to someone else in a completely different bank. They are then able to go down and withdraw that $500 in cash.

    How does it all work? How much physical cash does any given bank have on hand? Where do they get more from if a bunch of people go make cash withdrawals one day, and two weeks later, more people want to keep cashing out?

    (no, I'm not planning on trying to rob a bank)
     
    Last edited: May 30, 2020
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  2. The Shadow

    The Shadow

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    You deposit your money and then pay them to use your money to make the bankers rich.

    Terry
     
  3. HalfHazzard

    HalfHazzard Señor Member

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    The government just prints $1, $5, $10, $20, $50, and $100 if you need more.
     
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  4. Gonzoso

    Gonzoso

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    Then they make more rules to get more of your money and use your money to influence government to make more rules to get more of your money.
     
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  5. PatinAz

    PatinAz

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    You know, I keep an undisclosed amount of cash in my safe for "just in case"s. I couldn't help but wonder, with this trillion stimulus here, another trillion stimulus there, how much value that cash actually has.
     
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  6. Hannie Caulder

    Hannie Caulder Diva extraordinaire

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    My accountant gave me a copy of this. Read it and everything will make sense. Scary.

    [​IMG]
     
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  7. PatinAz

    PatinAz

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    That looks very interesting. Going to use that plastic card now to buy it...
     
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  8. M2 Carbine

    M2 Carbine

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    Something I found out, that is interesting, about bank Savings and Checking Accounts and US Savings Bonds that keeps your money out of "probate" upon your death, is called,
    "Pay Upon Death" (POD).

    You simply name a POD on your accounts (simply by asking) and upon your death the money goes directly to the person (POD) named. No legal crap at all.
    As they told me at the bank, upon your death, the named POD person just shows identification and the money is immediately given to them.

    This keeps the Government and Lawyers from ripping off your money when you die.

    Look up POD on UTube.
     
  9. Hannie Caulder

    Hannie Caulder Diva extraordinaire

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    It's a long read but well worth it. Eye opening.
     
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  10. rj1939

    rj1939

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    "It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

    Henry Ford
     
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  11. screwman

    screwman

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    I don't know how much they actually keep on hand, but it ain't much.

    A friend of mine was buying a dump truck. They wanted 5 bucks for a cashier's check, so he demand cash from his account. Needless to say, the bank didn't have $30,000 in cash. He then asked for a check and they wanted $5 for it even when they couldn't cover it. They had to make vouchers so he could take them to other banks to get his 30 grand. He refused and made them do it.

    Kind of a long story just to tell you they didn't have 30,000 in their safe. It's a lot better when he tells it.
     
  12. Hannie Caulder

    Hannie Caulder Diva extraordinaire

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    Very true. Or if everybody read that book I posted.
     
  13. Batesmotel

    Batesmotel

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    An account holder needs to make prior arrangements to make large cash withdrawals. But it can be done.
     
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  14. TheDreadnought

    TheDreadnought

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    Banks have a reserve requirement they are required to maintain by the Fed. For example (made up numbers) they have to keep 20% of total deposits in hand vs lending them out or doing other things with them.

    This is not the same as the actual cash on hand at any given bank. No idea how much that is. Probably based on some multiple of their normal daily business. Definitely NOT enough to cover thousands of people withdrawing all their money at once, although they could have more money trucked in pretty quickly.

    For big cash withdrawals (100k+) I assume the bank would ask for some advance notice so they could have it ready for you.

    At the end of the day, paper money isn’t a big part of the overall banking system much anymore. It’s all just numbers in a computer. I think I remember something about them shifting cash or gold between different cages at the Fed, but that might be in relation to international payments. I don’t remember.
     
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  15. bfg1971

    bfg1971

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    Before the pandemic a bank was required to keep 10% of its deposits in cash the rest is loaned out. I think I heard that number was reduced to 2% recently but I may be mistaken.
    O
    In short if you want a large amount of cash you might have to wait a day or two for the bank to receive it.
     
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  16. bogeyman

    bogeyman

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    Those are great questions. However, to completely answer them would require at least a semester’s worth of a good Money and Banking college class. Please don’t take this as anything even closely resembling an academic primer on money and banking. My example is to just illustrate the general idea.

    In general, money transfers between banks are handled by offsetting cash balances. All banks are required to either be a member of the Federal Reserve system or they must “correspond” with a bank that is a member. These institutions must keep a portion of their deposits in an account with the Fed. Let’s say that my bank and your bank both have $10,000 in their account at the Fed. I want to “wire” $1,000 to you. My bank initiates the transfer and $1,000 of my bank’s Fed balanced is transferred to your bank’s Fed balance. Your bank now has $11,000 at the Fed. Mine now has $9,000. Your bank then gives you credit for the extra $1,000. My account is debited for the $1,000 of my “wire”. At the end of the day the banks must calculate how much to keep at the fed based upon that day’s transactions and balances.

    There are a number of types of these transfers. Fed wires and ACH are the two main types in the US. For international wires most institutions use the SWIFT system. you can Google them if you want to know the differences between them.

    As for cash on hand, banks only keep a small fraction of their deposits in actual cash. Most people do things electronically. In order to keep everyone from taking out their money at the same time, say, during a crisis of some sort, the FDIC was created to guarantee that the bank would always be able to give you your cash if you really need it (up to FDIC limits). This prevents what is called a “run” on the banks as happened during the Great Depression of the late 1920”s.
     
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  17. PatinAz

    PatinAz

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    I'm wondering if my just-in-case money in my safe would be better off as gold.

    Just woke up this morning pondering these things. Sick of reading about covid and riots.
     
    Last edited: May 30, 2020
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  18. rj1939

    rj1939

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    I am surprised the Fed can continue to operate in today's world, too much information out there, showing what used to be able to be done in the dark.
    We have had one or two Fed officials jawboning about having "tools" to deal with the current situation...................those tools are all various forms of debt.
     
  19. Hannie Caulder

    Hannie Caulder Diva extraordinaire

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    I'm not. Look at all the people who willingly sacrificed their 1st Amendment rights over a bogus virus scare. Lots of sheeple out there. And they're still wearing masks.
     
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