Mr Cooper Group Inc (COOP)

[Dmdmd2020]

IMO...Once the Fiat Currency Notes are created then consumers started to use the paper currency to buy goods and deposit them into the banks.


https://www.investopedia.com/terms/f/fractionalreservebanking.asp


"BREAKING DOWN 'Fractional Reserve Banking'
Banks are required to keep a certain amount of the cash depositors give them on hand available for withdrawal. That is, if someone deposits $100, the bank can't lend out the entire amount. That said, it isn't required to keep the entire amount either. Most banks are required to keep 10% of the deposit, referred to as reserves. This reserve requirement is set by the Federal Reserve and is one of the Fed's tools to implement monetary policy. Increasing the reserve requirement takes money out of the economy, while a decrease in the reserve requirement puts money into the economy.

Fractional Reserve Requirements
Some banks are exempt from holding reserves, but all banks are paid a rate of interest on reserves. This rate is called the "interest rate on reserves" or the "interest rate on excess reserves," the IOR and IOER, respectively. This rate acts as an incentive for banks to keep excess reserves. Banks with less than $15.2 million in assets are not required to hold reserves. Banks with assets of less than $110.2 million but more than $15.2 million have a 3% reserve requirement, and those banks with over $110.2 million in assets have a 10% reserve requirement.

Fractional Reserve Multiplier Effect
The term fractional reserve refers to the fraction of deposits held in reserves. For example, if a bank has $500 million in assets, it must hold $50 million, or 10%, in reserves. Analysts reference an equation referred to as the multiplier equation when estimating the impact of the reserve requirement on the economy as a whole. The equation provides an estimate for the amount of money created with the fractional reserve system. The estimate is calculated by multiplying the initial deposit by one divided by the reserve requirement. So, using the example, the calculation is $500 million multiplied by one divided by 10%, or $5 billion. It should be noted that this is not how money is actually created. It is only a way to represent the possible impact of the fractional reserve system on the money supply. As such, while is useful for economics teachers, it is generally regarded as an oversimplification by policymakers."


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Now, let's assume that WMI has assets by virtue of MBS Trusts Liquidations (assets from beneficial interests in MBS Trusts). Per the DB settlement:


Deutsche Bank Trusty complaint against FDIC filed September 8, 2010
https://www.fdic.gov/bank/individual/failed/wamu-amended-complaint.pdf

Page 2 (last sentence):

" As of September 2, 2010, the Primary Trusts’ current principal balance outstanding was approximately $34 billion."

Thus, $165 billion - $34 billion = $131 billion of MBS Trust assets were liquidated
therefore, $131 billion / $165 billion = 79.39% was liquidated as of 02 September 02, 2010


Assumptions:

1) WMI Escrow Marker Holders has beneficial interests of at least 5% of all MBS Trusts

2) A total of $692 billion in mortgages were securitized by WMI subsidiaries from 2000 to 2008

3) Total liquidation of all MBS Trusts as of September 02, 2010 = 79.39%

$692 billion x 79.39% = $549.3788 billion; therefore $549.3788 billion x 5% = $27.46894 billion in cash


Now if a banking entity were to lend it out through fractional reserve lending:

$27.46894 billion x 10 = $274.6894 billion in principal to prospective borrowers

If the WMI Escrow Marker Holders received the liquidated cash from the MBS Trusts upon liquidation, a banking entity could have used a 10 times multiplier for lending and charged interest:

$274.6894 billion x 3% x 9 years compounded = $358.407363 billion

$358.407363 billion - $274.6894 billion (principal) = $83.717963 billion in interest alone