They create it.
If they need 10% in reserves they can either take that original $10,000 keep $1,000 in the vault and loan out $9,000.
Or they can keep all $10,000 in the vault and loan out $100,000.
Would Mr. Bankerman rather collect interest on $9,000, or $100,000?
Remember that the borrower almost never gets his loan in cash, it’s almost always in the form of a check, or as a deposit in his account.
That's funny.
If they need 10% in reserves they can either take that original $10,000 keep $1,000 in the vault and loan out $9,000.
Excellent! Yes! Correct!
Or they can keep all $10,000 in the vault and loan out $100,000.
Bzzzt! Wrong! Thanks for playing.
Try to follow the math. If the Fed requires you to keep 10% of all your deposits as a reserve and you get a deposit of $10,000 then your reserve requirement is $10,000 x 0.1 or $1,000. You seemed to understand that.
Now, if you're keeping $10,000 in the vault, how in the name of public school math do you get $100,000 to loan out? Take your time. Walk through the steps one by one.