this post was submitted on 11 May 2026
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me_irl
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The neat part about fractional banking is that the bank is allowed to just "create" money out of thin air and issue the debt to you. They don't have to have the money to issue the mortgage. They don't care that your debt is "risky" because investment banking is really just run off of vibes at this point.
Historically and today, discrimination has been a big factor in who gets approved for mortgages.
The entire concept of risk that not explicitly based on the individual, like extrapolating from population data, is discriminatory to the individual
That's not how fractional banking works. You're confusing the economic concept of money supply with outright fraud.
They don't "create" money. Someone deposits $100. They take $80 or $90 of that and use it to make loans. This increases the overall supply of money in the economy. But there's no printing press in the back office turning out notes. And they don't do the same thing digitally. The only bank that's allowed to literally poof money into existence is the Federal Reserve.
Couple problems with that.
Zero reserve banking has been allowed since 2020 (US). Banks are not required to have any cash reserves in order to make loans.
Fractional reserve banking does not mean that no money is created out of thin air when making a loan, but that not all of it is.
Actual empirical evidence and bank records support the notion that at least the bulk of the money loaned is created ex nihilo.
https://www.sciencedirect.com/science/article/pii/S1057521914001070