They are definitely responsible for their own liqudity and their own lending policies, which as you say in the right conditions (bad loans/defaults or massive desire to withdraw money) can cause chaos due to the lack of physical assets and the inability to call back loans (due to the contracts that underwrite them).
I also agree that they issue credit. They also get issued credit. I also agree that there is some 'faith' involved in expecting people to pay back their loans, but there is also routes for that money to be recouped anyway and money that has gone bad (via default etc) is understood as an impact on profitability, the bank needs to be charging enough of a gap in interest between what it borrows at (your savings rate or the federal reserve rate) versus what it charges for lending to cover the events of default. That's their entire business model.
I agree it is kind of semantics, but in this case i feel it is important to understand because people are continually claiming that bitcoin is a better alternative due to a fixed supply where as fiat money is printed for fractional reserve banking/lending... which is just incorrect.
DCC Price at posting:
8.8¢ Sentiment: None Disclosure: Not Held
