Ironically banks are some of the least shareholder friendly businesses, they direct a lot of profits to their own bonuses during good times rather than expanding their balance sheet or returning the profits to shareholders. I wonder how much this paradigm contributes to bad outcomes as it could easily incentivize short-termism and recklessness. Poisoning the books with bad choices that won’t take effect for multiple years or a decade, or comes with individually asymmetric risk less than the business’ asymmetric risk (10% of bank failure just means 10% I retire early) seems really tempting when it means years of big bonuses.
Given that banks seem to have an uncanny ability to destroy themselves in spite of an ever increasing set of regulations trying to stop them from doing so, and the current trend indicates in the future we’ll be left with just a few blessed TBTF banks, I think we ought to consider a system where the Government or Fed provides the core functionality of “let me put $X in an account so I can use $X in the future” for free and banks compete based on value added. It’s the least-worst outcome, because otherwise people are going to turn to crypto to avoid the for-profit oligopoly subsidized by repeated debasement and access to Fed lending/liquidity tools unavailable to the public.
Given that banks seem to have an uncanny ability to destroy themselves in spite of an ever increasing set of regulations trying to stop them from doing so, and the current trend indicates in the future we’ll be left with just a few blessed TBTF banks, I think we ought to consider a system where the Government or Fed provides the core functionality of “let me put $X in an account so I can use $X in the future” for free and banks compete based on value added. It’s the least-worst outcome, because otherwise people are going to turn to crypto to avoid the for-profit oligopoly subsidized by repeated debasement and access to Fed lending/liquidity tools unavailable to the public.