The Biggest Banking Scam in Existence: Fractional Reserve Lending

By Dr. John L. Reizer

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I have always believed it was extremely unfair that a person could deposit his or her hard-earned money in a savings account and be rewarded with virtually no interest payments whatsoever. On the other hand, an individual could borrow money from the same banking institution and be hammered with countless fees and interest charges. Why is it legal for a bank to charge 29% interest on a credit card and only pay, to its depositors, 1% interest for funds deposited in the bank’s savings accounts? The answer is because the entire banking industry was founded on completely corrupt practices. These practices were designed and developed to rob people blind.

From a very early age, in government funded indoctrination centers (public schools), we are taught that the Federal Reserve Banking System is a fair and safe place to store your monetary assets. Nothing could be farther from the truth.

Some years ago, I discussed some of the same information in this article with a friend of mine who was a branch manager at a local bank in my hometown. What he proceeded to tell me about the banking industry made me feel quite ill. I had thought I was upset about the fact that my bank was paying me pennies, in interest, for the funds in my savings account. That banking practice was only mildly distressing compared to the new information I had just learned.

According to my friend, the biggest banking scam on the face of the planet is known as Fractional Reserve Lending. I had never learned about this banking practice in the public school system. The best way for me to describe Fractional Reserve Lending is to begin by writing that there’s actually very little money in reserve. When you deposit a certain amount of money in a bank, you have, in reality, given that bank the ability to create and lend, to consumers, ten times the original amount you deposited. You read that correctly! For every dollar we deposit into a U.S. bank, the bank’s money inventory increases tenfold. That institution then lends the, made out of thin air, money to customers and charges them interest on top of it.

Fractional Reserve Lending practices are completely legal for all banks in the Federal Reserve Banking System. If you or I attempted to write a $100.00 check from a bank account that had a $10.00 balance, we’d be thrown in jail before the ink on the check dried. This is how and why banks can afford to lend money to individuals and companies that cannot afford to pay the funds back. Hell, the banks don’t care because they never had the money in their drawers to begin with.

After thoroughly studying the practice of Fractional Reserve Lending for several years, I can tell anyone with confidence that the entire banking industry is built upon various deceptive practices, all of which have been implemented with the sole purpose of stealing money from financial consumers. I can also write, with confidence, that the entire Federal Reserve Banking system is based on a lot of hot air and not much else. Our government is regularly printing money, not backed by any tangible assets, and circulating it into the economy. Even a child could understand that this is a recipe for a financial disaster.

What most people fail to realize is that the Federal Reserve is not a Federal agency. It’s a private corporation made up of very wealthy stockholders. There’s nothing Federal about it and, coincidentally, there’s nothing on reserve in the form of real assets.

So the next time you enter a banking institution to apply for a car loan or home mortgage, remember that the money you are borrowing doesn’t really exist. The bank you are borrowing from never had the funds in the first place. They are charging you fees and interest on money that only exists in theory, and is based on the biggest scam in existence – Fractional Reserve Lending.

Article Source –  The book, ” Pull Your Head Out of the Sand: Because What You Don’t Know Can Hurt You” (Available on

5 thoughts on “The Biggest Banking Scam in Existence: Fractional Reserve Lending

  1. Anna Martin April 24, 2012 / 8:47 pm

    I couldn’t agree more with your post. As young people, we were never exposed to the truth regarding the Federal Reserve. “The Creature from Jekyll Island: A Second Look at the Federal Reserve” is a great book that every American citizen should take the time to read, It explains a lot about what’s currently taking place right before our eyes.

    Anna Martin

    • Dr. John Reizer April 25, 2012 / 7:15 am

      Hi Anna,

      Great commentary! The book you recommended is a must read for all Americans. Thanks for contributing on

      Dr. John Reizer

  2. Edwina Reizer April 27, 2012 / 6:40 pm

    Oh what fools we people have become. Thanks again for reminding all who visit your website about info that is so important to know.


  3. Marijana Perić November 26, 2012 / 6:21 am

    The banking cartel holds a monopoly in the manufacture of money. Consequently, money is created only when IOUs are “monetized” by the Fed or by commercial banks. When private individuals, corporations, or institutions purchase government bonds, they must use money they have previously earned and saved. In other words, no new money is created, because they are using funds that are already in existence. Therefore, the sale of government bonds to the banking system is inflationary, but when sold to the private sector, it is not. By keeping interest rates high, these bonds became attractive to private investors, including those in other countries. Very little new money was created, because most of the bonds were purchased with American dollars already in existence.
    Today, those bonds are continually maturing and are being replaced by still more bonds to include the original debt plus accumulated interest. Eventually this process must come to an end and, when it does, the Fed will have no choice but to literally buy back all the debt of the ’80s — that is, to replace all of the formerly invested private money with newly manufactured fiat money — plus a great deal more to cover the interest. Then we will understand the meaning of inflation.
    Now the options are even greater. The Monetary Control Act of 1980 has made it possible for the Creature to monetize virtually any debt instrument, including IOUs from foreign governments. The apparent purpose of this legislation is to make it possible to bail out those governments which are having trouble paying
    the interest on their loans from American banks. When the Fed creates fiat American dollars to give foreign governments in exchange for their worthless bonds, the money path is slightly longer and more twisted, but the effect is similar to the purchase of U.S. Treasury Bonds. The newly created dollars go to the foreign governments, then to the American banks where they become cash reserves. Finally, they flow back into the U.S money pool (multiplied by nine) in the form of additional loans. The cost of the operation once again is born by the American citizen through the loss of purchasing power. Expansion of the money supply, therefore, and the inflation that follows, no longer even require federal deficits. As long as someone is willing to borrow American dollars, the cartel will have the option of creating those dollars specifically to purchase their bonds and,
    by so doing, continue to expand the money supply.
    It is true that our money is created out of nothing, but it is more accurate to say that it is based upon debt. In one sense, therefore, our money is created out of less than nothing. The entire money supply would vanish into the bank vaults and
    computer chips if all debts were repaid. Under the present System, therefore, our leaders cannot allow a serious
    reduction in either the national or consumer debt. Charging interest on pretended loans is usury, and that has become institutionalized under the Federal Reserve System.
    The Mandrake Mechanism by which the Fed converts debt into money may seem complicated at first, but it is simple if one remembers that the process is not intended to be logical but to confuse and deceive. The end product of the Mechanism is artificial expansion of the money supply, which is the root cause of the hidden tax called inflation.
    This expansion then leads to contraction and, together, they produce the destructive boom-bust cycle that has plagued mankind throughout history wherever fiat money has existed.
    The benefit of this is no ordinary citizen. The only beneficiaries are the political scientists in Congress who enjoy the effect unlimited revenue to perpetuate their power, and monetary scientists within. The banking cartel called the Federal Reserve System, who were able to harness the American people without their knowing it, the yoke of modern feudalism.

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