Students Across the Nation are Planning Something Unprecedented to End Student Debt Forever

[Jim Lane]

128. I don't see any inconsistency

Fractional reserve banking is perfectly consistent with the principle that each bank uses double-entry bookkeeping for its own finances.

I just don't believe that major American banks don't use double-entry bookkeeping. I did a quick search and found nothing definitive, but my guess is that the omission is because nobody thinks it's a point that's at all in question.

Let me try to understand this by focusing on defaults. On your understanding, is there any adverse consequence to a bank that makes a loan that goes bad? It seems to me there isn't. If that were true, banks would delight in lending to, for example, high-risk-high-reward startups. Charge them 20% annual interest. The one that turns out to be the next Microsoft will pay you back and you make a juicy profit on that loan. When the rest go bust and default, no worries, you just write off the loan and lend the money again. I very much doubt that it works that way.

Can you provide a citation for the proposition that major banks don't use double-entry bookkeeping?