Sometimes Henry Blodgett shows his ass.

It's not like Fractional Reserve Banking is new. The concept was a few hundred years old when Columbus used it to finance his voyage not-quite-around the world. The problem with banking isn't "banks" it's "investment banks vs. commercial banks".

So it's like this: Your "bank" is technically a "thrift." At least, it was from 1933 to 1999. Thrifts aren't allowed to invest for financial gain - in other words, play the ponies. Thrifts aren't allowed to play the ponies because Stock Market Crash of 1929. However, in the go-go '90s what could go wrong and all of a sudden everybody is playing the ponies, and the thrifts wanted in on the act because virtually nobody remembered history.

The Glass Steagall Act was enacted in 1933 to prevent the thrifts from playing the ponies, and torn down in '99 so they could once again play the ponies. Wanna see a great quote about that?

"I want to sound a warning call today about this legislation," he declared, swaying ever so slightly right, then left, occasionally punching the air in front of him with a slightly closed fist. "I think this legislation is just fundamentally terrible."

Here's where it gets funny. Business Insider was founded by Henry Blodget, who was one of the pony players back in the '90s. Whether he was good at it or not isn't really at issue; fact of the matter is he was damn shady at it, paid hefty fines and is forever banned by the SEC from ever playing the ponies. But if the Fed gets into the game of pony-playing, YAY! All bets are off.

An absolute essential primer on fractional reserve banking is Money as Debt:

And Michael Lewis wrote an absolutely spectacular book about what happens when you repeal Glass-Steagall called The Big Short.