Who owns the money in your bank account?

Who owns the money in your bank account? This question seems trivial. Who else would own the money in your bank account besides yourself? Well...most evidence points to the bank owning the money in your bank account...not you.

What evidence?

Exhibit 1: The bank's balance sheet.
On a bank's balance sheet you'll see that the bank includes customer deposits under the liabilities section (see balance sheet below). This indicates the bank has incorporated depositors' money onto the bank's balance sheet which means the bank has taken ownership of the money. The bank takes this money and loans it out to other parties. These bank loans are indicated on the asset side of the balance sheet. Some may argue that since the deposits are recorded on the liability side of the balance sheet that the bank hasn't taken ownership of the money. Liabilities are money that the bank owes to other parties. The owed party does not own the money, however. The transfer of ownership does not take place until the bank pays the other party. Until then it's the bank's money.


Exhibit 2: Because the government says so
In 1825 the Supreme Court of the United States stated that when a customer deposits money in a bank that money becomes the property of the bank. From the case of Bank of the United States v. Bank of Georgia:

It is clearly not the case of a special deposit, where the identical thing was to be restored by the defendants; the notes were paid as money upon general account and deposited as such, so that according to the course of business and the understanding of the parties, the identical notes were not to be restored, but an equal amount in cash. They passed, therefore, into the general funds of the Bank of Georgia and became the property of the bank. The action has therefore assumed the proper shape, and if it is maintainable upon the merits, there is no difficulty in point of form.

This transfer of ownership occurs because all banks in the US have become "Savings and Loan" type banks. Retail banking can be simplified to two types of banking: "Deposit" banking and "Savings and Loan" banking. Both are briefly described below.

Deposit banking
Customers deposit their money with the bank for safekeeping. This money can be withdrawn from the bank at any time by the customer. The customer retains ownership of the money and pays a fee to the bank for safekeeping of the money (i.e. a bailment). This would mean the ownership of the money does not transfer to the bank and thus, would not show up on the bank's balance sheet. An analogy would be paying a company to securely store some of your valuables. You pay them a fee for their services but the company does not take ownership of your valuables.

Savings and Loans banking
In this type of banking customers deposit money into a savings account that yields interest for the customer. The bank will use the customer's deposits to extend loans to other bank customers. Time durations will be established for the deposits which means depositors will not be able to retrieve all of their money on demand. In this case it makes sense for the depositor's funds to show up on the bank's balance sheet since the bank has taken ownership of the money to lend out to other customers.

All banks in the US operate as a strange combination of "Deposit" banks and "Savings and Loan" banks. The banks promise customers they can have access to their money on demand - a feature of "Deposit" banking - but then the bank proceeds to loan out the money - a feature of "Savings and Loan" banking - hoping that several customers do not demand all their money at once.

And this is why previous generations were always skeptical of banks. They knew there was a good chance they could go to the bank one day to withdrawal their money and it would not be there.