They create an account for you with, say a million bucks in it...The bank "gets" that money from the Fed.
Also there is the "fractional reserve" aspect, which, as I understand(?) it, means that when someone (including the Fed) deposits $100 in a bank, the bank can loan out that $100 ten times, based on the $100 "reserve" and the assumption that most borrowers will repay. When a lot of borrowers don't repay, there's trouble.
The reserve ratio used to be, say, ten percent, but by now, the system at the top seems to operate on crafty 'phantom reserves' (e.g. reserves based on debt based on debt etc.) or even basically no reserves. So the "thin air" metaphor seems more true than ever.
As I (sort of) understand it, the Fed gets a sweet deal by buying government securities (T-bills, US bonds & notes)---that's where the gov't mostly gets its 'printed' money (mostly of course just ledger entries)---and then they can use that money for a year to make their own private deals whereby they make a ton of money.
A big part of the federal budget goes to paying the Fed interest on the money it loans 'us' when it buys Treasuries (US gov't securities). A year later, the Fed pay that interest back to the US Treasury. I've asked a few bankers, "Why do we bother paying that interest to the Fed when the Fed just turns around and gives it back??" None of them had an answer (one said, "if you can answer that, you're a better man than I"). I think I figured out, that a) since the Treasury just
keeps that returned money, it constitutes a 'hidden' tax, and, b) the Fed gets to use the money to make more money. (How much money and where it goes, I'm uncertain.)
Apparently the "full faith and credit" of the US government is based on its ability to levy taxes. In the "old days" the taxes were mostly tariffs on imports (and excise taxes?). Now, with the federal income tax, and tariffs deplored as inhibiting trade, the burden falls mostly on labor.
If you try to get big corporations to pay a fairer share, as Paul Wellstone did, you might get "Wellstoned."
Anyone know to what degree I might have this right?
Side note... a few years ago I asked a local bank president, "Will there eventually be just one big bank?" He said, with a little smile, "Oh no. There will eventually be just
two big banks."