reserve banking, such as the risk of insolvency for each bank. The goal of this paper is to show that a specific form of … private bank coalition (a joint-liability arrangement) allows the members of the banking system to engage in fractional … reserve banking in such a way that the solvency of each member bank is completely guaranteed. Under this arrangement, I show …

the risk of in-solvency for each bank and the associated losses to bank liability holders. I show that a specific banking … the safety of bank liabilities as a store of value and maximizes the rate of return paid to bank liability holders …