Guess what. That's
exactly what they're doing. Anyone that's under the illusion that their savings account with a bank is just sitting there in nice crisp Federal Reserve Notes (aka "IOUs") doesn't know the first thing about banking. Banks are only required, by regulation, to keep an amount of cash (a percentage set by law) on hand to meet their operational needs. The vast majority of deposits are kept in various notes and bonds (i.e. "investments") -
just like the Social Security Trust Fund.
Banks
invest deposits and earn interest. That's how they can pay interest and cover their operational expenses. Doesn't anyone ever wonder how they pay for those nice expensive buildings and salaries??? :eyes: (They can't do it on free checking accounts, no matter how many they have.)
See
http://www.ssa.gov/OACT/ProgData/fundsQuery.html