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Start the Bank of the United States, cancel FDIC insurance. There problem solve.
https://en.wikipedia.org/wiki/First_Bank_of_the_United_State... https://en.wikipedia.org/wiki/Second_Bank_of_the_United_Stat...
Start the Bank of the United States, cancel FDIC insurance. There problem solve.
We tried that. Our country has had great difficulty with central banking in the past, and today. Entire books have been written on this topic, if you wish to learn more, I'd start with the history of the First and Second bank of the United States. https://en.wikipedia.org/wiki/First_Bank_of_the_United_State... https://en.wikipedia.org/wiki/Second_Bank_of_the_United_Stat...
Read Quest for Prosperity -- the private/public construct of distinction is a complete myth that is exposed by the titans in Asia and Latin America. The more we stick to the myth in the US, the longer it will take for us to have the same degree of success. Innovation comes not out of motive for profit, but ou of need and desire and capability.
But the flip side is: why don't we just let megabanks go bust? If they go bust, the government steps in, briefly nationalizes them, sells off the parts (the shareholders get nothing, of course), and life continues. As long as this period is kept as short as possible why is there any danger of "meltdown"?
>small institutions must submit to the rigors of the free market. >market discipline has worked to keep smaller institutions on the straight and narrow, it has been ineffective with megabanks >market participants have proved [in]effective in monitoring risks at these [huge banks]. >They know they will be protected by a taxpayer rescue should a large institution teeter. How is this not obvious to everyone involved?
Banks that are too big to fail are too big to be allowed to exist. Government protection only for the commercial/retail part is an obvious but insufficient requirement.
>small institutions must submit to the rigors of the free market. >market discipline has worked to keep smaller institutions on the straight and narrow, it has been ineffective with megabanks >market participants have proved [in]effective in monitoring risks at these [huge banks]. >They know they will be protected by a taxpayer rescue should a large institution teeter. How is this not obvious to everyone involved?
Start the Bank of the United States, cancel FDIC insurance. There problem solve.
FDIC is a form of privatizing the profit, while socializing the risks for the banks.
BUT it's also a form of "insurance". If there's a suspect a bank won't be able to honor deposits, bank run ensues, THEN the given bank can't honor deposits obviously, because no bank works like that today, that is: self fulfilling prophecy
It's a necessary evil (for the customer's sake)
I'm confused by this. The large banks are (arguably) more efficient because of economies of scale, eg. less duplicated management, purchasing power. So it's probably not a good idea to limit the size of banks which is what this article seems to propose, because that'll make banking more expensive. But the flip side is: why don't we just let megabanks go bust? If they go bust, the government steps in, briefly national…
One issue is some banks were on the border on if they needed bailing out, and shareholders might prefer the risk of catastrophic failure than taking a bailout which would lose them their shares.
I'm confused by this. The large banks are (arguably) more efficient because of economies of scale, eg. less duplicated management, purchasing power. So it's probably not a good idea to limit the size of banks which is what this article seems to propose, because that'll make banking more expensive. But the flip side is: why don't we just let megabanks go bust? If they go bust, the government steps in, briefly national…
I'm confused by this. The large banks are (arguably) more efficient because of economies of scale, eg. less duplicated management, purchasing power. So it's probably not a good idea to limit the size of banks which is what this article seems to propose, because that'll make banking more expensive. But the flip side is: why don't we just let megabanks go bust? If they go bust, the government steps in, briefly national…
Earlier quoted context omitted.
FDIC is a form of privatizing the profit, while socializing the risks for the banks.
Yes BUT it's also a form of "insurance". If there's a suspect a bank won't be able to honor deposits, bank run ensues, THEN the given bank can't honor deposits obviously, because no bank works like that today, that is: self fulfilling prophecy It's a necessary evil (for the customer's sake)