A good way to understand how banks work

A good way to understand how banks work is to imagine starting your own bank.

How to start your own bank put up some of your own money Unit 5 receive a banking license obtain a charter necessary equipment hire and train a staff rent a building $6 million $1.2 million $2 million $2.8 million at the Fed in the vault to your Fed account to clear checks for withdrawals customers open checking accounts savings accounts certificates of deposit loan good credit risks

Accounting system balance sheet Assets (what it owns) Liabilities (what it owes to others) Net worth (what belongs to the owners) equity + too low with new assets