If you keep badgering banks about regulatory capital, they won’t lend money.

Some U.S. topics for a change. Tom Brown over at bankstocks.com points out the obvious: one reason American banks aren’t lending is that they are afraid how much regulatory capital they will need to keep around at the bank!

Tom explains it pretty well; here’s all I can add: When a bank takes in a dollar of deposits, it has to keep some small part of that around the bank (anywhere from 4 to 10 cents, maybe). The rest can be lent out.

So your deposit money becomes someone else’s loan money, for the most part.

If you don’t tell the banker what the part he/she must keep back is, they won’t loan it out.

Tom Brown took a big hit during the Financial Crisis, like everyone else dealing with banks on the equity side. But he is no dummy. He ran a successful hedge fund, and continues to run it, even if it isn’t as successful as, say, 2006. And he knows banking accounting, better than most people around. Probably better than these 28-year-old junior regulators, too.