Counting Chickens

Yesterday's post was probably the stupidest thing I could have done.  I think I left the office between 11 or 11:30 last night.  Nice "ease out" there.  Of course today I show up and there are more holes in our projects levy than I have fingers.  So typical.  We'll make it though.

I saw an interesting article today on CNBC.com. 

http://www.cnbc.com/id/44191317/

It is entitled "A Problem for US Banks: A Reverse Run".  What a bank run is is what happened during the great depression.  Everybody takes their money out of the banks which is bad for the banks because now they don't have enough money to back up the loans that they have made.  So this is a reverse bank run.  Everybody is putting their money into the bank.  Probably because most have lost confidence in the stock market and really have no other place to put it.  The interesting thing is that this is also a bad thing for the banks.  According to the article the banks have to pay FDIC insurance on all deposits and "banks begin to press up against regulatory limits on leverage as the deposits grow."  This second part makes no sense to me.  Leverage is when you lend out more than you have.  This is perfectly legal and does make sense.  Basically, if you have $100 and make a loan for $200 you are now leveraged 2 to 1.  The government has rules for banks as to how much leverage they can have.  I think it's something like 10 to 1.  So why the article confuses me is that if the banks got more deposits wouldn't that reduce their leverage because now they have more money backing up their loans?  That's why I would think anyway.  I will have to investigate further.