When a customer deposits his or her money, they are giving the bank permission to borrow the money. This borrowed money is what is used for the loans to other customers. The bank pays a smaller amount of interest to the customer who allowed them to borrow the money and charges a larger amount of interest to the customer they lent the money to. The bank makes money from the difference in the interest. If too many depositors run to withdraw their money like in a time of depression, backup systems like a network of banks and the Federal Reserve and other systems kick in to get money to the banks that need it to meet their obligations so the bank doesn't collapse. *Answer given by Sharai* Shay Shay Sharai Ray Your Sun Ray* Here is a different take on this matter... PEOPLE(1) do not create money to put in BANKS(2). Money is paid to them by their employers/ORGANIZATIONS(3). And these ORGANIZATIONS' money is either borrowed money from BANKS(2) or from profits by selling the goods to other ORGANIZATIONS(3) or PEOPLE(1). If you follow the numbers, you will see that it's a loop between BANKS, ORGANIZATIONS and PEOPLE. But no one of them creates money. Raw, first hand, initial money BANKS get is from Federal Reserve Bank and the later MINT that currency. And the brutal fact is that the Federal Reserve Bank gives the money on loan for an interest rate to these banks.