Specifically, when a bank writes off a loan (an asset to the bank), it reduces its capital (bad loan reserve and equity). And, given our fractional reserve system, a reduction in capital can markedly reduce its ability to make future loans: if a bank did not adequately reserve for bad loans, and has to start digging into equity, it could end up having to call in loans to get back into compliance with reserve requirements.
Kind of like a margin call.
We moved to La Jolla for school, too: we have a daughter at Bishops, with a son there next year, too (coming from Evans). Which school are your kids at?
