Years and years ago. I'll try to guess where you are going.
A percentage became an assest for the bank. A percentage went into the banks reserve. With that assest the bank could use it to produce another loan and so on. Though not actually, but somewhat similar to a ponzi scheme.
But now, what we see today are banks sitting on bad loans. Their assests diminished losing their borrowing power. So now comes the fed and the treasury to the rescue. The fed convinces the govt something must be done to thwart a disaster. The govt agrees. So the fed and the treasury scheme to create money to pimp into the system.
How am I doing so far?
Your guesses aren't very good.
A percentage became an assest for the bank. A percentage went into the banks reserve.
No. The entire mortgage loan is an asset. The bank's deposits are liabilities, but that's not where I'm going.
How am I doing so far?
Not so good.
Say your bank has $1,000,000 in deposits. You come looking for a $200,000 mortgage loan. They loan you $200,000 and the home seller takes his $200,000 and deposits it in the bank. Now the money supply is $1,200,000.
Same thing if you took out a car loan. You increase the money supply and Greenspan and Bernanke didn't have to co-sign or even know about your loan for the money supply to increase.
The Fed can influence but not control the money supply. Questions?