How to solve the banking problems in three easy steps...
1) Eliminate ‘insurance’ on all bank accounts, as served by the federal government. All it really becomes is a special tax, with free money for people if a bank goes south.
2) End banking regulation. People are shocked when their bank closes, because, well, isn’t it regulated? Whereas if they /knew/ it was unregulated, and uninsured, they’d spend considerably more attention upon choosing and maintaining accounts, as who’d want to do business with a bank that’s just a glorified gambling establishment?
3) A home loan that is not current should count as a net zero asset until it is sold. Presently, because of regulations, banks are hesitant to let properties go, as when it’s sold, the value is refixed, and they’ll have to actually show all the loses that they are facing. It is unnecessarily inflating the housing market, preventing recovery, and forcing tens of thousands into rental properties where they could be buying their own home.
The problem is regulation and government manipulation of the market. Let the banks that need to fail, well, fail, and let those who are actually strong shine, rather than being in the crowd of me-toos who are held up only because they’ve a huge inventory of bad loans and foreclosures that are counted as assets rather than liabilities.
I agree, but if we drop the lender of last resort function of the fed, and remove the federal guarantee of bank accounts, we need some other function in order to discourage bankruns.
That’s what I want to discuss in detail, my idea is to have bank deposits themselves be tradeable assets with maturity dates. That way, if a bank’s status becomes scetchy people either have to ride it out or find someone to buy them out. It would work like the stock market, in that if there is a loss of conficence, the price immediately drops, and people can either wait it out or sell out at a small loss. The alternative is a stampede to withdraw ones funds, and the last man to the bank looses everything.