Not sure if i can answer your questions but here’s my stab at it:

1) What if your bank decides to take your $200 and invest it rather than sending it to the Federal Reserve?

I believe banks take a percentage of their deposits and do invest by making loans and buying fixed income securities. I remember hearing years ago, that banks try to make a 4% “spread” between the cost of borrowing (interest on checking accounts and cd’s) and investing (via extending loans and buying bonds). I’m pretty sure banks are prohibited from buying stocks, due to stocks inherent volitility. And i believe banks can lend out 10 to 1 and evn much higher than that. (like 45 to 1 with some banks) which to me, is scary high leverage.

Federal regulators are supposed to make sure that all banks are sound, which makes me wonder why so many banks are failing and/or struggling. Where were the “feds”?

2. What happens if a bunch of people withdrawal all (or a lot) of their cash out of their bank accounts at one time and the Federal Reserve doesn’t have enough cash to distribute to everyone because the BANK played the float?

FDIC insures up to $250,000 per depositer now, right?

3. What if the bank barrows money (from another bank) to send to the Federal Reserve and then invests YOUR money, trying to make a profit?

I think this is called “fed funds” and is heavily practiced among the banks.

4. What if the stock market sucks and the bank loses your money and can’t pay back the loan they took out to send to the Federal Reserve?

i don’t think banks can invest in stocks. FDIC insurance kicks in, right?