The plumbing of the financial system.
11 topics · 14 curated works
No prior grounding assumed.
Modern Money Mechanics: A Workbook on Bank Reserves and Deposit Expansion
Federal Reserve Bank of Chicago · 1961
Walks through, step by step, how one new bank deposit expands into a multiple of new deposits across the banking system as each bank relends a…
Assumes you know the vocabulary.
The Mystery of Banking
Murray N. Rothbard · 1983
Fractional reserve banking is a form of legalised fraud against depositors that expands the money supply and drives the business cycle, and only…
+1 more at this level
Primary sources and full treatments.
Bank Runs, Deposit Insurance, and Liquidity
Douglas W. Diamond & Philip H. Dybvig · 1983
Banks create liquidity by funding illiquid loans with deposits redeemable on demand, which makes a run a second equilibrium of the very contract that…
+10 more at this level
12 of 14 works
Federal Reserve Bank of Chicago
Walks through, step by step, how one new bank deposit expands into a multiple of new deposits across the banking system as each bank relends a fraction of what it receives, making commercial bank money creation mechanical rather than mysterious.
Murray N. Rothbard
Fractional reserve banking is a form of legalised fraud against depositors that expands the money supply and drives the business cycle, and only full-reserve banking removes that structural instability.
link checked 17 Sept 2026Federal Deposit Insurance Corporation
Traces federal deposit insurance from more than 150 failed state-level schemes before 1933 to the FDIC, arguing insurance worked nationally only once it was compulsory, federally backed and paired with real bank supervision.
Douglas W. Diamond & Philip H. Dybvig
Banks create liquidity by funding illiquid loans with deposits redeemable on demand, which makes a run a second equilibrium of the very contract that makes banking useful.
link checked 17 Sept 2026Douglas W. Diamond
Explains why banks exist at all: they let many small savers delegate the costly job of monitoring borrowers to one institution, which can do it more cheaply than each saver monitoring directly, so long as the bank itself is disciplined by holding a diversified loan portfolio.
Jay R. Ritter
Measures the two costs a company pays to sell shares for the first time — the underwriter's spread and the money left on the table from underpricing — and finds the second, indirect cost is often larger than the fee the bank openly charges.
Basel Committee on Banking Supervision
Sets the first internationally agreed minimum ratio of capital to risk-weighted assets for banks, making risk-weighting itself — not a flat leverage ratio — the basis for how much capital a bank must hold.
Lawrence M. Benveniste & Paul A. Spindt
Models IPO bookbuilding as a mechanism for extracting truthful demand information from investors who would otherwise have every incentive to understate their interest and pay less.
Judith S. Ruud (Congressional Budget Office)
Applies the option-pricing approach to bank guarantees that Merton derived in 1977 to the FDIC's actual insured-deposit base, estimating what the government's deposit guarantee is really worth and how far the premiums banks pay fall short of it.
Tobias Adrian & Hyun Song Shin
Shows that banks and broker-dealers actively adjust their balance sheets to hold leverage roughly constant as asset prices move, which turns ordinary balance-sheet management into a source of system-wide procyclicality rather than a private risk decision.
Basel Committee on Banking Supervision
Sets higher and better-defined capital and new liquidity requirements for internationally active banks, on the premise that the previous Basel framework let banks hold too little loss-absorbing capital against the risks they carried.
link checked 17 Sept 2026Anat R. Admati, Peter M. DeMarzo, Martin F. Hellwig & Paul Pfleiderer
Rebuts, one by one, the arguments banks make against holding more equity capital, arguing that equity is not actually more expensive for a bank than debt once its lower risk is properly accounted for.