Part 3/10:
Long describes a complicated transaction she facilitated at her former job as a managing director at Morgan Stanley, where transferring $2.5 billion required immense caution. This process exposed her to the fragility of the banking infrastructure, particularly the potential for credit risk where a bank might collapse during a transaction.
Fractional Reserve Banking and Its Risks
The decline of reserve requirements in the U.S. banking system, with leading banks holding as little as 10% cash against demand deposits, raises concerns about systemic stability. Long notes that the U.S. banking landscape comprises roughly 10,000 smaller community banks alongside a few large institutions that dominate. This reality makes the system vulnerable, especially under duress.