[BostonCard]

Reserve requirements are supposed to be countercyclical.  You force banks to increase them in the good times so that in the bad times, when they have to write off assets you can relax them and they are still solvent.  The natural inclination of banks is to overextend themselves in the good times because returns are good, but then, to paraphrase Warren Buffett, they are naked when the tide rolls out.

BC

[BostonCard]

Reserve requirements are supposed to be countercyclical.  You force banks to increase them in the good times so that in the bad times, when they have to write off assets you can relax them and they are still solvent.  The natural inclination of banks is to overextend themselves in the good times because returns are good, but then, to paraphrase Warren Buffett, they are naked when the tide rolls out.

BC