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When I take out a car loan, the other guys car dealer got a check for cash moeny." ....From a bank, which holds only your IOU

You are an idiot. The bank had to have the $10,000 in cash on deposit in order to write the check. Otherwise, when the clearing house tries taking it from your bank and giving it to the other guy's bank and the balance falls below zero, it bounces, and your bank gets shut-down because it is bankrupt.

A bank cannot send out money to anyone unless it has real money at the bank to send out.

Furthermore, even if the check clear's your bank, but your banks's reserves fall below required levels the FED starts charging you penalties.

No, bank's don't just arbitrarily issue pieces of paper that count for money. If they could BSC would not have gone under as well as many other banks in the recent crisis.

After it pays out, a deposit exists in the receiver's bank, and the loan exists in the originating bank. It really doesn't matter if they are the same bank or different ones, since one can just borrow from the other. The newly issued loan is self funding, for the banking system as a whole. Only repayment of a loan without issuing a new one, can extinguish the money created by any net new loan. Every net new loan expands the previous money supply, by its full face amount. No bank is constrained in the ability to make new loans, by any possible non-existence of the loan proceeds. Whoever receives them, they are bank debt and they remain bank debt for their whole life. That is all money is.

Bank reserves do not fall if the holder of the new balance wants savings or CDs.

That is how the money supply rose $2 trillion in the last 3 years, without a single net new reserve from the Fed, aka no change in M1 whatsoever.

As for BSC, the requirement is that someone will accept the bank's debts are money. That is precisely what no one was willing to do for Bear - except JP Morgan, which was willing, and did so.

You continue to confuse a bank's need to have an *asset* for every liability, with an inability to create both. There is no such inability, banks can pick how large their balance sheets are, as long as anyone accepts their debts. But they have assets to match their liabilities (and a little more).

Increasing liabilities without having any assets, is not only impossible for them, they don't have any reason to want to. Assets and liabilities balance (equity is just one of the later, the residual). That is just double entry accounting and an identity. You seem terminally confused on this point. Obviously, banks increase their liabilities solely to fund new and larger holdings of assets, not for its own sake.

Banks can't create net worth, but they can create matching increases in their assets and liabilities, at will. Subject to very loose regulation for transactions accounts only on the liability side, and some funding requirements scaled to assets on the asset side, with quite liberal risk adjustments. In practice, simply prudence is what restricts their leverage level. They know what their liabilities will cost, but not what their assets will be worth.