But what will these banks do with the funds?

They borrowed money and put it to work to sustain their profitability.

As their capital declines, so, too, do their future loans.

So there would be no need for bank runs.

Funds could be used for recapitalizing the banks and retiring some debt.

A high value inter bank funds transfer system settles transactions in real time, eliminates credit risk between system participants, increases circulation of funds, and enhances monetary policy implementation.

But how much public capital should be used, and on what terms? Private capital, of course, is preferable, but, given the risk that it will be wiped out by future public intervention, investors will be wary.

Bank shares in particular are rebounding, and some banks have even succeeded in repaying at least part of their government provided capital.

Consider the seemingly heated debate over how much capital banks should hold.

Because the banks made their investments with too little unborrowed money, they became insolvent.

The inter bank market dries up, as banks lose trust in one another.

Banks in the eurozone came under pressure, and interbank tensions increased.

The GIPS own central banks started to lend newly printed money to their private banks, and this money was then used to finance the current account deficit.

First, the Fed is trying to give relatively specific guidance about the future path of the federal funds rate (the overnight rate at which commercial banks lend to each other).

Second, the correlations between economic growth and financial deepening on which I relied do indeed vanish when countries financial systems move beyond banks, electronic funds transfer, and bond markets to more sophisticated instruments.

It helps banks immediately, and it creates the right incentives for future behavior, as banks will know that the government will not prevent private equity capital from being destroyed in a crisis.

When they do, the money they pay is also locked up in the PBC s accounts.

Uncertainty bred fear, causing banks, businesses, and households to hoard cash.

The exporting countries central banks responded by reducing their emissions of fresh money to be lent to the domestic economy.

Their central banks can borrow and use the money to buy up some of the flood of risky assets in the market.

Just as banks are hoarding cash, households will try to preserve wealth by increasing their saving.

Indeed, the credit channel is frozen and velocity has collapsed, with banks hoarding increases in base money in the form of excess reserves.

Since June 2008, German, British, and French banks have withdrawn 253 billion worth of credit from Irish banks and other Irish borrowers 70 of the total foreign funds withdrawn.

A large part of the money and credit that was created out of nothing from former interbank transactions, now excluded from official guarantees, would return to nothing.

It means giving the EU s rescue facilities the power to inject funds directly into undercapitalized banks.

While governments might offer attractive liquidity facilities, banks will be unable to on lend the funds.

If government becomes a partner, it may well endow the banks immediately with the equity required to sustain their business.

Still, any delay could be enough to trigger a bank run in either country.

Worse still, much of the money flowing into the banks to recapitalize them so that they could resume lending has been flowing out in the form of bonus payments and dividends.

In the 1990 s, the Japanese central bank injected huge amounts of money into banks in an attempt to boost the money supply. At one time, central bank money was up by 35 in one year, yet M3 was rose by only 7 .

The EFSF will also provide funds to ensure that Irish banks depositors can get their money back today.

In the Federation of Bosnia and Herzegovina, loans are issued, and in Republika Srpska funds are granted, and in both cases banks are used for services.

But, despite these risks, investing in the informal market can still be a better choice than keeping one s money in the bank.

Providing enough money to the banks was, his team seemed to say, the best way to help ordinary homeowners and workers.

Should one of these banks run into trouble because of a sovereign debt default, the necessary rescue funds will be readily available.

The effects of banks hijacking of national payment systems to service only the modern economy are compounded by the exclusive agreements that banks and money transfer companies such as Western Union have signed with most African countries.

And yet, the opposite is more likely, with domestic inflation a danger aggravated by central banks loosening of money supply to help commercial banks bringing the threat of higher interest rates.

Today, by contrast, broad segments of the public see the big banks and big government as being run by the same elites who created the crisis, and then spent public money under one guise or another bailing the banks out.

Establishment by presidential decree of the Inter Agency Commission to Combat Money Laundering.

Banks will have to recognize the losses and, if necessary, find the additional capital to meet reserve requirements.

The long term plan is that this money should come from a fund created by European banks themselves.

But how can we distinguish good banks from bad?

Improved central bank policy is another huge factor.

Clearly, some of the EFSF funds will have to go to recapitalize banks that cannot raise money from the markets.

Government subsidies for private bad banks, or public bad banks to clean up private banks toxic assets, are a bad way for taxpayers to transfer money to troubled banks compared to normal capital injections.