[prepend]

Thus the reference to a marketing error.

Banks that have too much cash on hand go out of business. If a bank ends up being near this it just reduces its loan rates and loans the money out for slightly less, but still better than sitting on cash.

[mlyle]

> Banks that have too much cash on hand go out of business. If a bank ends up being near this it just reduces its loan rates and loans the money out for slightly less, but still better than sitting on cash.

Right.. The bank can increase its level of leverage principally by:

* Decreasing loan interest rates to encourage people to take loans

* and/or decreasing savings interest rates to discourage people from keeping deposits.

Of course, real banks do both based on market conditions and capital requirements. And, of course, there's not an implausibly thin level of reserves like you imply to pedantically harass the prior commenter: you must have at least the required reserves, and certainly having way too much cash is toxic to profitability.