Earlier quoted context omitted.
I suppose what OP was arguing is, when bank A transfers to bank B, does bank B check with the Feds that the money from bank A is "real"? And is a transfer from A to B really a transfer from A's account at the Feds to B's? In that case, why would the US have to act "indirectly", threatening bank A not to work with bank B? They could simply deny any transfers to and from bank B's account at the Feds, which would make a…
> when bank A transfers to bank B, does bank B check with the Feds that the money from bank A is "real"? Yes, unless the banks have mutual accounts with each other that they can use to settle instead. So, if bank B is accepting to be owed money by bank A for any transfer from A to B, they don't need to settle – but there's practical limits to that, imposed by both risk and regulatory concerns. Eventually, they'll nee…
> unless the banks have mutual accounts with each other that they can use to settle instead.
So this is just based on trust that the other bank will keep a truthful score of the transfer, and there won't be a dispute at settlement time?
If the banks are often willing to trade with each other "on trust alone" like that, I suppose that shows why the Feds can't always directly block dollar transfers, but have to rely on threats of account freezes.