But there's no multiplier as you describe it. It appears though. First deposit $1M. Then create that loan for 800k, and deposit it right back in the same bank. Now the bank has $1M versus 800k loans so the reserve is back above the 20 percent reserve requirement. We don't even need to work out the math, just keep repeating the process with smaller loans until we reach our limit at the reserve, which clearly must be (the very same) $1M in deposits, and the max of $4M loans, making for $5M total. Accounting rules to prevent this being done by a single bank alone just means it takes more banks trading loans to get the same effect. Rather than a wonky description of the rules, basic econ class still has the variations covered.