Comments on: Is the Financial Sector a Utility?

By: BMB

BMB — Sun, 19 Apr 2009 21:15:08 +0000

I would agree. The problem is that would result in a considerably different environment for our culture, and our ‘gimme gimme’ society is a long way from ready to accept that way of life. Of course, future generations may have no choice.

By: Brad

Brad — Sun, 19 Apr 2009 04:31:28 +0000

Your point about the FDIC points out the whole trouble with regulation of course. The regulators get caught up in the same mania that’s sweeping the rest of the nation or world. Just like Fannie and Freddie got caught up in the mix and the FDIC drank their own Kool Aid.

I always think about game theory and how there’s just no way to implement fractional reserve banking. When you’re trying to design a “game system” you never want to have an assigned (centrally planned) number in the mix. So, shy of just making up a number (30? 20? 5?) the only real way to have banking is to give in to the shocking notion that you should only be able to lend out what you have in deposits. That seems like a likely way to help get savings rates up and our debt load down. I’m just not sure we can swallow all that medicine at once.

By: BMB

BMB — Sun, 19 Apr 2009 02:45:28 +0000

It’s too bad that the FDIC isn’t one of those heavily regulated insurance companies. They might actually have enough money to handle all the bank failures — if they hadn’t stopped collecting premiums from the banks for an entire decade.

The government can’t even do the ‘right’ things right.

Of course, we might not have all these bank failures without fractional reserve lending (silly us — we thought that when we put our money in the bank that they kept it there for us). And the AIG debacle shows that insurance companies need to stick to insurance.

Maybe we need an alternative, more conservative, not-for-profit banking system where our money can be kept without risk if we so chose. You know, like the First Mattress Bank.