What Sookster said:
"If you want an idea how our banks work, I would suggest reading a document called Modern Money Mechanics that was published by The Chicago Fed. It does not talk about the inner workings of the central banks, but there are some statements as to how the central banks influence commercial banks. What I was referring to earlier was The Fractional Reserve Banking System, and it is my belief that not only does the commercial banks operate using that methodology, but the Central Banks as well. It makes logical sense. And, the document clearly states that The Fed puts a reserve requirement to the commercial banks, and that amount can change."
I completely agree with this. But we need to take this a step further. Are the reserve requirements any kind of restraint? There are two methods for banks to obtain reserves so they could lend at will: interbank lending (LIBOR), and the fed discount window.
So while the fractional reserve rate exists, it is really not an effective restraint.