Banking has been a quasi-government-operated industry for over 100 years, since the creation of the Fed in 1913, the creation of the FDIC in 1933, and the incre

Banking has been a quasi-government-operated industry for over 100 years, since the creation of the Fed in 1913, the creation of the FDIC in 1933, and the increased regulation since 2008. In 2008 the Fed created a two-layer banking system: banks that were "too big to fail" whose deposits are effectively insured for infinite amounts, and all other banks whose deposits are insured for $250k. Nobody realized this until a few weeks ago, and without the government's scramble to respond everyone would have moved their deposits to the big banks, killing all the others. People finally realized this because of duration risk on long-term investments. Who caused that duration risk to actually manifest as a real problem? The Fed! The same people who are supposed to run the banking system in a stable way have contributed to the instability of the banking system by keeping rates low for so long, overreacting to Covid, assuming inflation was "transitory", and then raising rates very quickly trying to squash the inflation they caused. That's not capitalism. We haven't had capitalism in banking for a century. People have an impression that banking is a private industry and the government comes in to bail it out, when really the government was involved the entire time. Aside from the crash in 2008, where the Fed really did help, a number of the major recessions in the past century have either been caused by or made worse by the Fed, including the Great Depression by Bernanke's own admission. Banking regulations certainly need to be changed because of what happened last week, but the way the Fed is run should definitely also be changed.