Posted on 11/05/2010 12:32:02 PM PDT by newbie2008
On March 31, 1980, a major piece of legislation was passed by Congress to deregulate commercial banks and other deposit-type financial institutions. This deregulation took the form of phasing out interest rate ceilings on various types of time deposits and of extending the type of assets thrift institutions were authorized to hold. However, this act took three steps in the opposite direction: it required all banks, member and non-member, and all thrift institutions offering checkable deposits to hold the same percentage of these checkable deposits as non-interest reserves, either in vault cash or on deposit with the Federal Reserve; it increased federal deposit insurance to $100,000 per account; and it allowed all these institutions to borrow from the Federal Reserve.
It is apparent that Congress did not intend to unleash the forces of competition on the financial system. If this had been Congress’ intention, it would have phased out, rather than increased, deposit insurance and would have left the amount and location of reserve holding to the in dividual institutions.
The purpose of this paper is to explain how a completely free banking system would operate. Under free banking, all financial institutions are subject only to the general laws of incorporation and against fraud. They would not be restrained by the rules of a central bank and not be audited by any government agency, nor be protected by any government deposit guarantee. The first part of this paper hypothesizes how individual banks would thrive in this competitive environment, while the second part shows how the most serious problem this economy faces—inflation—can be controlled without any government agency doing the controlling.
(Excerpt) Read more at thefreemanonline.org ...
OoH. We can’t have any of that.
It would shut down those who choose to use (take) your money for other purposes - like to fund PITA, Sierra Club and ACORN.
The result was the industrial revolution.
Unfortunately, greed is a universal trait. Banks unwisely invested customer deposits in fast money-making schemes which failed. When the banks were forced to close, depositers tried to get their money back only to find it had all been spent.
Some did. But the banking industry mostly blew their money on political campaigns seeking special privileges and protection from competition.
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