When you deposit money in a bank, they create 9X the loans of what you've deposited.
I'd bet if you read the fine print on the MS offering it would tell you that this is exactly what they were doing. MS & GS are too smart and too big of a target to engage in outright fraud.
Source? I thought what they did is loan out 90% of what you deposited.
Example: you deposit $1000 in a bank with 10% reserve policy ($100 set aside as capital reserve of the bank).
Bank loans out $900 to customer for new office furniture; then that money is used to pay the office store, which is another depositor at the bank - which then counts as another deposit, 10% of which is set aside as reserve ($90). Another loan of $810 is then made, etc.
"Reserve requirements affect the potential of the banking system to create transaction deposits. If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the change in excess reserves of $90 into a maximum of $1,000 of money ($100+$90+81+$72.90+...=$1,000), e.g.$100/0.10=$1,000."
The banks are only required to hold reserves of something like 10% of what they've lent out, depending on the country. That means, effectively, that when you deposit $1000, the bank then turns around and lends $10,000. Most of the money in the world exists only on balance sheets.
When you deposit physical cash, the bank gains an asset, ie: that cash. It gains an equal liability, ie: the amount it credits your account. Thus the sum total of the amounts deposited and the amounts loaned must not exceed 10X the amount it either has in its safes, or that it has stored with the central bank.
Sorry, does not parse. When the bank lends you money, it's an asset for them. Like you mentioned elsewhere in your comment, deposit accounts are liabilities for the bank, because somebody (the depositor) could come calling for the money.
What happens is that you loan the money, it gets spent, and ends up in your deposits again. THEN, you are effectively counting a dollar as: "Owe $ to original depositor, Get $ from person taking the loan, Owe $ to new depositor". Adding up to 1 dollar. Except when reporting dollars on deposit, you say 2.
Individual banks don't "create" money. But as a quirk of lending and taking deposits, the banking system creates money, at least on the books.