[sgsag33]

Why do we even need banks? If they make money by lending money that mostly belong the people (state/feds) anyways, I guess we all would be better if banking was just a state monopol. I guess I'm just missing some points here so maybe someone can help and explain me why this is a bad idea?!

[TheOtherHobbes]

We need banks because they make it possible for the rich to gamble with the income of the poor.

If your deposits are backed by mortgages or other secured loans you and the bank expect an added return for the "risk" - which is really just making a bet that enough people can pay something extra to compensate for those who default.

This is presented as "how things are" but it actually makes no sense - not least in failing to explain why most of the population is so starved of cash, in spite of long working hours, that it has to borrow at all.

That aside - there's a feedback loop which pushes investors to riskier and riskier lending, sometimes supported by more and more extreme kinds of fraud. Eventually, but somewhat predictably, the system suffers logistic collapse. Because that's what happens to recursive systems with permissive parameters.

[madsbuch]

In my understanding, the role of banking is to take on the intrinsic risk when doing money allocation.

1. The central banks control supply (by controlling their interest rates)

2. The banks allocate resources (lending out with a risk premium)

3. Consumers and entrepreneurs use the money for value creation.

To me it seems like banks ought to be able to fail. The problem is that banks have gotten the responsibility of the money infrastructure (the cash to e-money transition) which we can not afford to fail.

We should lift the money infrastructure responsibility of banks.

[rtkwe]

The old distinction between investment and savings banks seems like one of the many regulations we should bring back. Let businesses choose between the two and if their investment bank goes belly up well that's tough. Could even keep FDIC insurance low for both but like so many things legislatures keep falling to pressure to undo the regulations learned from past collapses.

[sumedh]

> If they make money by lending money that mostly belong the people (state/feds) anyways,

Naa most of the loans are not using other people's money, banks just create money out of thin air (aka put a record in some database table) and that entry is your loan money.

[roflyear]

It's a way for society to make long term bets in aggregate without taking a ton of risk. Mortgages, small business loans, etc

[xioxox]

There are things called Government Savings Banks. The UK has National Savings and Investments (NS&I [1]), which allows individuals to save money with unlimited protection (though I think their accounts typically allow maximum amounts of a few million pounds). The UK government uses this as a form of raising money. I believe other countries have similar schemes.

[1] https://en.wikipedia.org/wiki/National_Savings_and_Investmen...

[bengale]

Tops out at £2m or £4m for a couple.

[HDThoreaun]

The government doesn't want to be responsible for making all the loans banks do. It's not easy to do and if the government makes bad ones and loses money people will complain.