Does banks capital appear on left side of balance sheet

Reference no: EM131305080

In July 2010, Congress was considering having the federal government set up a "lending fund" for small banks. The U.S. Treasury would lend the funds to banks.

The more of the funds the banks loaned to small businesses, the lower the interest rate the Treasury would charge the banks on the loans. Congressman Walt Minnick of Idaho was asked to comment on whether the bill would be helpful to small businesses.

Here is part of his response: The bank that's struggling to write down their commercial real estate assets is having to take a hit to capital, and this provides replacement capital on very, very favorable terms. So it deals with the left side of the balance sheet. . . .

a. Would a loan from the Treasury be counted as part of a bank's capital?

b. Does a bank's capital appear on the left side of the bank's balance sheet?

Reference no: EM131305080

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