The conversation continues:
Hi Ellen [Ellen Brown],
"...why do banks go bankrupt when they have too many bad loans on their books?"
Banks lend money and borrow money for a whole host of reasons. If they don't get paid back what they lend, even if it is multiplier-money, the banks still owe back what they have borrowed. Is that what you are getting at?
The banks borrow based upon the hope of having the interest income and fee income, etc., from the lending they've done. If the interest-income is not forthcoming, the bank is in a worsened position, as new lending takes time, etc.
Wouldn't the NEED Act have to say that as money is repaid, it will only end up in the Revolving Fund if there are no further outstanding debts on the part of the given bank? The last bank in the chain, the bank that finally doesn't owe anything, could turn the money over to the Revolving Fund without being possibly hit hard by doing so.
If the bank owes anything and uses the interest part of the loan repayment to pay, in turn, the banks liabilities, then confiscating that loan-repayment money would end the particular bank's ability to apply that interest-income to paying it's own debts and regardless of the multiplier and debt-money money-supply expansion/contraction. Is that how you see it?