James Spends his Checking Account

Of course, James hasn't borrowed money for his health. Let's see what happens when James spends the loan. He writes a check to Enumclaw Clean Cars, and the car salesman deposits the check in his own bank, the Second National Bank of Enumclaw. The Second National bank will send this check as a deposit in the Federal Reserve Bank for the district, thus increasing their own reserves. As we see in Table 3 part C below, this leaves the Second National Bank with excess reserves.

Clearing