> For example, if I deposit on Charles Schwab, is the cash held in my Schwab account used as capital for margin loans to other Schwab customers? I would think not (unless I'm misunderstanding how finance works). Like of course the money is probably lent out like banks do, but FDIC insured banks have rules about what types of things they can lend money to, right?

Traditionally, lending deposits out as loans (especially mortgages) was seen as the most important thing that banks did, their core function. Nowadays things are more abstract and regulations are different, but it wouldn't surprise me if margin loans could still be at least partly funded (at least in an abstract capital-ratio sense) from deposits.