[GJM] Which Types of Banks do not use "Fractional Reserve Banking?"

[robert searle]

Dear Chris Cook



        Thank you for your response. 



Robert Searle.



--- chris cook <cojock at hotmail.com> wrote:

> 
> Robert
> 
> It is necessary to distinguish between deposit
> taking institutions - such as Credit Unions - which
> do not create Credit on the basis of an amount of
> regulatory Capital, and "Credit Institutions", which
> do.
> 
> It is this latter activity of credit creation which
> is known as "Fractional Reserve Banking".
> 
> JAK Bank of Sweden is, as I understand it, a deposit
> taking institution. So called Islamic Banks are not.
> They create credit in best Fractional Reserve style.
> The difference with conventional Banks is that
> Islamic Banks claim to (and sometimes actually do )
> "invest" (rather than lend) the money they have have
> created. Such investments give rise to issues with
> regulators in relation to the amount of Capital they
> must set aside to cover them.
> 
> Yunus' Grameen Bank is a conventional Credit
> Institution as far as I know, albeit with an
> enlightened policy to defaults (ie it doesn't chase
> defaulters, but in any case, has few defaults
> because loans are always guaranteed by relatives or
> friends of the borrower).
> 
> Yunus certainly had starting capital which was
> indeed lent to begin with, but if and when this
> "morphed" into capital supporting conventional
> credit creation, I do not know.
> 
> You may be interested in this 
> 
>
http://www.atimes.com/atimes/Global_Economy/JD03Dj04.html
> 
> recent article of mine on Peak Credit, published in
> Asia Times. 
> 
> Few people appreciate that the value actually
> provided by Banks is that of a guarnatee of
> borrowers' credit, but that is the fact of it. I
> have already been approached by two investment banks
> in respect of it, both with big portfolios of
> subprime debt.
> 
> I have ceased to attack the practice of banking on
> moral or ethical grounds: I simply observe that
> credit intermediaries, like all other intermediaries
> in a "Peer to Peer" world, are simply redundant, and
> will either transform to a future as service
> providers, or simply wither on the vine.
> 
> Best Regards
> 
> Chris
> 
> 
> 
> 
> 
> > Date: Fri, 2 May 2008 19:12:46 +0100
> > From: dharao4 at yahoo.co.uk
> > To: discussion at globaljusticemovement.net
> > Subject: [GJM] Which Types of Banks do not use
> "Fractional Reserve Banking?"
> > 
> > 
> > Dear All,
> > 
> >      I expect Chris Cook would be able to answer
> this
> > question, and if possible list the type of banks
> > involved (hopefully). Though most commercial banks
> > create money out of thin air there are a tiny
> minority
> > which do not. In other words, they may actually
> use
> > existing money deposited with them. I believe
> rightly,
> > or wrongly this is true of Credit Unions.
> > 
> > I also recall how Muhammad Yunnus set up his first
> > bank to help the poor. He seem to indicate that he
> had
> > some starting capital which could be lent, and
> paid
> > back with interest ofcourse. He did not have it
> > created out of thin air. Again light on this would
> be
> > gratefully acknowledged with thanks.
> > 
> > Robert Searle.
> > 
> > 
> >      
>
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