We trade the bunch of checks drawn on my bank that they have for the bunch of checks drawn on their bank that I have. On the average it works out about even, in any event even when the balance tips one way or the other, we don't send an armored car full of cash back and forth, we just bill each other for the balance!
If it doesn't even out, then we transfer funds in the form of ones and zeros from one bank to the other. Worst case, we borrow money at the Fed Funds rate from each other.
4 of the $3000 loans you made were for people who were getting work done on their homes. They signed the checks over to their contractors who need cash to pay their illegal employees.
You now have four 250 pound guys with toolbelts in your lobby and they want to know where the cash is.
Ooooooooo big scary monsters! I have 4 guys I out weigh who want, hmmm, let's see, $7.50/hr 8 hrs/day 5 days/week 4 guys... $1,200 total cash...
I have all of that $10,000 deposit in the vault, I supposes I could, oh, uh, I dunno, give them cash???
BTW, You loaned out $9,000 of your $10,000 deposit. You only have $1,000 in your vault, and need to pay out $1,200...
You cashed some checks from another bank? With what?
we just bill each other for the balance!
Great. Another bank billed you for $3,000. How do you give them the money?
I have all of that $10,000 deposit in the vault, I supposes I could, oh, uh, I dunno, give them cash???
Yeah, you have 4 guys with your $3000 checks in your lobby. They want $12,000 in cash.
BTW, You loaned out $9,000 of your $10,000 deposit. You only have $1,000 in your vault, and need to pay out $1,200...
Did I say you had 4 guys who wanted $3,000 each? I meant you had 40 guys who want $3,000 each.