Notes 1
Banks are so important to the plumbing of our economies that government regulators also insist that they have safety cushions. They ought to have
more assets (things of value that they own) than liabilities (what they owe to others); the safety cushion is basically the dierence between the two—
assets minus liabilities.12 A bank’s assets include things like cash, shares, property, computer equipment, and perhaps your mortgage (which entitles
the bank to receive a long-term stream of payments from you, so it’s a valuable thing). Bonds, which also promise a future repayment stream to those
who have bought them, are also assets. Liabilities, on the other hand, include deposits and other things the bank owes to those who have lent to it. So
if you deposit a $100 bill into your bank account, the bank physically has it but it is still your money, so it owes you that $100 and must give it back to
you when you ask for it. Your deposit is counted as part of the bank’s liabilities. The balance sheet of a bank is simply a document laying out assets
