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They loan it out to other people to buy cars, houses, to start a business etc. The government makes them keep a small percentage of the money as reserve - around 10%, but the rest is loaned out. If everyone wanted to withdraw their money all at once (called a bank run), the bank wouldn't have enough money to pay everyone right away.

This happened during the late 1930's at the beginning of the great depression. In response, the government started the FDIC -Federal Deposit Insurance Corporation. It guarantees savings accounts up to $100,000 even if the bank goes out of business.

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13y ago

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