Gotta ask whether the banking system makes sense in its current form. - Part of it is actually a utility. Payments, sending money from one place to another, making sure there's an account at the other end of that number. Everyone needs this, yet being a huge international network there isn't a whole lot that one bank offers that another cannot. - Part of it is deciding who to lend money to. Makes sense for the bank t…
You’re describing “narrow” banks. While they make sense for consumers, our banking system is tightly coupled with another: mortgages. The money that you deposit is loaned out. Could the federal government do the too? Sure, and the government (talking about the US here) does end up owning a large chunk of mortgages via Fannie Mae and Freddie Mac. But the expertise and the manpower around vetting the mortgages is a _lo…
mortgages don't have to go through retail banks, and there are plenty of other transaction fees to support banks of all sorts.
in fact, there's no reason we should have allowed the consolidation of banking other than to allow rent-seekers to amalgamate more sources of relatively risk-free cash flows under the control of fewer and greedier hands. we could have maintained lots of small banks that serve the community and region, enriching those communities, rather than a few behemoths that strip-mine them.
a lot of the "work" of mortgages is really mindless paper-shuffling by other rent-seekers taking their little slice of the large transaction price. none of those service providers go away if the government decided to take over (not that i'm advocating such a takeover).