[omgomgomgomg]

Why exactly should banks be private companies at all?

Theyre just skimming middle man between the government and end consumer.

Sure, the government would know your bank balance and spendings, but that could be worked around

If youre in trouble with the irs or the law, the government will have all the insight they request.

Sounds crazy? We the people had to bail them out and never get anything of their profits.

Too big to fail? As in systemic risk?

Well, only the state should be too big to fail.

And if they fail, the fdic needs to cover, also tax payer funded.

Any input is appreciated. I know the interest rate should be set by banks and not the politicians, but yeah, is that really it?

Addendum, this post has triggered an interesting discussion, it appears I am not alone with my thoughts.

So far, I do not see any ovewhelmingly convincing argument on why the banks shouldnt be run by the government. It doesnt have to be senate, it can be something relatively neutral like the irs.

[kornhole]

Yes banks should be better regulated to avoid letting them make risky moves. That aside, many regional banks rather than a centralized government controlled bank is critical to our freedom. Government controlled banks or CBDC will give government total surveillance and control over us since you cannot do much without money.

[lcnPylGDnU4H9OF]

In the US, a government-controlled bank would have stronger privacy because privacy is enshrined in law. Specifically my government cannot snoop on certain things.

If the government kept all of my banking records, they wouldn't be able to legally access them. Currently, they can just use taxpayer money to purchase these records from the corporations who gather them.

[Laaas]

Technically, the CBDC could be a privacy coin, albeit very unlikely.

[golergka]

There's no "should" because there's no high authority in humanity which decides what should and shouldn't exist. Banks exist because some people want to found banks and then other people want to use their services. The only way to prevent this from happening is to threaten violence or threat of violence to either of these people.

The better question would be, why would anyone use violence to force his opinion on other people.

[jjav]

> Banks exist because some people want to found banks and then other people want to use their services.

That's not quite true. Take a look a the various narrow banks which have been founded and people want to use their services, but the government won't approve them to operate.

[citizenkeen]

> The only way to prevent this from happening is to threaten violence or threat of violence to either of these people.

That's a weird view.

We could also just, you know, vote away banks. I'm not sure why a centralized bank would result in violence.

[Rury]

The answer to that question, is the very same reason you gave for why banks exist.

[SllX]

Banks do more than hold deposits; they also loan money. This is not a business you want the government in; nor do you want to eliminate private sector loans.

[syntaxing]

State owned banks are usually a bad idea for one reason, corruption. Historically, having the government control money supply is usually a recipe for prolific corruption. A good modern example is Turkey.

[brightstep]

The same kind of behavior happens in the private sector. Since it’s not government, we don’t call it corruption.

[HissingMachine]

Governments are even worse than banks with money, if they were private companies every government would be bankrupt ages ago.

[imtringued]

The house hold sector wants to save net. The corporate sector wants to save net. The government wants to save net. Tell me, where is the money supposed to come from? Will you drop it with a helicopter?

At some point some people have to spend off their money.

[userabchn]

I am certain that the people who make comments like this have never lived in a country where they had to deal with something like a government-owned bank.

[akira2501]

> Theyre just skimming middle man between the government and end consumer.

You're thinking of the "federal reserve" as "the government." This is a tempting but extremely flawed point of view.

> If youre in trouble with the irs or the law, the government will have all the insight they request.

These institutions make mistakes. They're also not immune to corruption or politics themselves. Government agents have qualified immunity. Do you really want to bank with someone you essentially cannot sue?

> I know the interest rate should be set by banks and not the politicians, but yeah, is that really it?

Rates should be set by the _market_. Which would be easier if currency were backed by anything other than _fiat_. You are in a tarpit, going further down is not the secret way out.

> neutral like the irs

What makes you think the IRS is "neutral?" Or presuming that's true, given this new responsibility, how are they capable of maintaining it?

Finally.. wouldn't something simpler, like just reimplementing Glass Steagall be the better idea? Let's make "consumer banks" and "investment banks" different and separately regulated again.

[differentView]

>And if they fail, the fdic needs to cover, also tax payer funded.

The FDIC is funded by the banks. It's backed by the US government in case it fails.

[fowtowmowcow]

Who should set the rate on interest for loans?

Just one entity without any other consumer options?

What happens if the government makes a ton of bad loans that never get paid?

[manojlds]

Why can't that be the central bank? We don't have private courts?

[pessimizer]

> Why exactly should banks be private companies at all?

It's a government trust. The only use of banks is to realistically evaluate loans, but priced-in bailouts take away all of the risk, and with it all of the signal. People get loans because they're insiders who have relationships with bankers, or because they're objectively overpaying for them.

If banks will always be bailed out, the proper amount of interest that should be paid on a loan is 0%.

[opportune]

The thing that private banks are supposed to do is compete on accurately assessing and pricing risk (for lending). The better they do at this, the lower the rates they can offer on loans - more demand for loans - and higher returns they can offer to depositors - more supply for lending - with higher profits for themselves. They compete on this spread in a market.

I do not think the government would be good at doing this at all. Assessing risk is very hard, and the competition is necessary for it to benefit consumers. Politicians could pass extremely harmful or stupid policies for populist purposes.

That said, because banks have an oligopoly on “give me a place to digitally hold money” and in practice more money than they could ever really productively lend (why do you think interest rates have been trending down so low historically?), they’re not doing a great job at either side.

That’s why I think the government should implement only narrow banking where they don’t lend, just manage the table of accounts and amounts, and let banks compete against that for deposits. You would still move money to a bank for yield, provided it’s good enough, and banks would still be able to lend and stimulate the economy. Yes they’d have less capital and be able to lend less, which may require structurally higher rates (which may actually be a good thing in the long run- a lot of lending and low rates are just going towards bidding up fixed assets like land or leveraged stocks, and not actual economic activity) but that would balance out with higher yields on deposits.