9 ms·

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

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.

HissingMachine 3y ago
Governments are even worse than banks with money, if they were private companies every government would be bankrupt ages ago.
- imtringued 3y ago
  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.
kornhole 3y ago
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 3y ago
  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.
  - quest88 3y ago
    Apply your logic about laws to private banks. Make it so private banks have to adhere to some new law. Same outcome.
    - deleted 3y ago
      [deleted]
    - lcnPylGDnU4H9OF 3y ago
      > Apply your logic about laws to private banks. I'm pretty sure that's actually a more ambitious endeavor than insisting on a government-run solution. I otherwise still see the same issue in OP's comment: there is no reason for the private bank to exist.
  - tastyfreeze 3y ago
    Sorry, you must not be paying attention or this is sarcasm. Giving the government the keys to your banking data and expecting them to respect rights is naive. Government ownership of data means they don't have to respect privacy because they already own the data. The US government is wholesale spying on the entirety of electronic communications and working with social media sites to make some voices less prominent. Private business should be able to tell the government to pound sand when banking data is requested without a warrant or subpoena. Banks are not able to do that. Banks exist as long as they are in the good graces of regulators. Laws prohibiting the sale of personal information (location, purchases, banking) closes the loophole. The solution is less government, not more.
golergka 3y ago
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.
- citizenkeen 3y ago
  > 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.
  - mhluongo 3y ago
    How are laws and the will of the people enforced? Typically via fines or jail time... both of which are backed by violence.
  - SllX 3y ago
    The enforcement of this vote (or law) would be violence against others. Majoritarian tyranny is still just tyranny.
  - beisner 3y ago
    OP is making a dumb libertarian argument basically saying "there's nothing stopping people from doing what they want except the threat of force/violence" (which is trivially true, and the mechanism by which any group of people - even democratic societies - imposes their will on insiders or outsiders), and "do you really want to use THE THREAT OF VIOLENCE to prevent me from STARTING A BANK???" as if it's different from the enforcement of any law. OP questions the use of "should" uncharitably, because the original comment's unstated assumption is clear - society "should" be set up to tradeoff freedom and minimizing collective harm. Violence is not the only form of harm; unregulated banking can obviously cause harm in the society (starvation was pretty harmful in the US during the Great Depression), and so it's valid to question whether or not society should consider how the benefits of private banking (with any amount of regulation) trade off with a public alternative.
fowtowmowcow 3y ago
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 3y ago
  Why can't that be the central bank? We don't have private courts?
  - fowtowmowcow 3y ago
    I ask again: What happens if the government makes a ton of bad loans that never get paid?
    - danaris 3y ago
      The government would seem to have every recourse to collect.
      - willcipriano 3y ago
        In a manner of speaking. Take a look at student loans, how have they been intending to collect on those lately?
        0zemp2c 3y ago
        those loans are being repaid with votes Democrats dangled loan forgiveness at the midterms, bought enough votes to blunt a Republican trouncing...never followed through to reward the voters but no worries, the promise can be re-made for the Presidential election all Biden has to do is offer full loan forgiveness and the election is his DeSantis will counter with auto loan forgiveness (just as big of a problem now), and it will be a battle to see who can buy more votes
      - fowtowmowcow 3y ago
        Hard to collect money on unemployed and dead.
syntaxing 3y ago
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 3y ago
  The same kind of behavior happens in the private sector. Since it’s not government, we don’t call it corruption.
  - SllX 3y ago
    While corruption is never good, I’ll take private-sector corruption over government corruption every day of the week if I’m forced to choose. Governments are sovereign.
    - pessimizer 3y ago
      The government is corrupted by its relationships with the private sector. The only other way to pull money out of government is through salaries, and government workers don't get paid that much.
      - SllX 3y ago
        Most people are “the private-sector”, it’s called society and includes every voter not working directly for the government, which is most of them. If a government is necessarily corrupted by its relationships with the private-sector, then the word corruption is meaningless in the context of government. You should also mind that governments can also be corrupted—can be but not necessarily are-by their relationships with their own employees. I advise you to find and apply a limiting principle, one that would be useful for you in distinguishing government corruption from government business.
  - tastyfreeze 3y ago
    Would you rather have one bank of thousands fail due to corruption or have the one state owned bank fail and the entire economy grind to a halt?
differentView 3y ago
>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.
userabchn 3y ago
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.
SllX 3y ago
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.
akira2501 3y ago
> 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.
opportune 3y ago
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.
pessimizer 3y ago
> 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%.

HissingMachine 3y ago

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

imtringued 3y ago
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.

kornhole 3y ago

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 3y ago
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.
- quest88 3y ago
  Apply your logic about laws to private banks. Make it so private banks have to adhere to some new law. Same outcome.
  - deleted 3y ago
    [deleted]
  - lcnPylGDnU4H9OF 3y ago
    > Apply your logic about laws to private banks. I'm pretty sure that's actually a more ambitious endeavor than insisting on a government-run solution. I otherwise still see the same issue in OP's comment: there is no reason for the private bank to exist.
- tastyfreeze 3y ago
  Sorry, you must not be paying attention or this is sarcasm. Giving the government the keys to your banking data and expecting them to respect rights is naive. Government ownership of data means they don't have to respect privacy because they already own the data. The US government is wholesale spying on the entirety of electronic communications and working with social media sites to make some voices less prominent. Private business should be able to tell the government to pound sand when banking data is requested without a warrant or subpoena. Banks are not able to do that. Banks exist as long as they are in the good graces of regulators. Laws prohibiting the sale of personal information (location, purchases, banking) closes the loophole. The solution is less government, not more.

golergka 3y ago

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.

citizenkeen 3y ago
> 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.
- mhluongo 3y ago
  How are laws and the will of the people enforced? Typically via fines or jail time... both of which are backed by violence.
- SllX 3y ago
  The enforcement of this vote (or law) would be violence against others. Majoritarian tyranny is still just tyranny.
- beisner 3y ago
  OP is making a dumb libertarian argument basically saying "there's nothing stopping people from doing what they want except the threat of force/violence" (which is trivially true, and the mechanism by which any group of people - even democratic societies - imposes their will on insiders or outsiders), and "do you really want to use THE THREAT OF VIOLENCE to prevent me from STARTING A BANK???" as if it's different from the enforcement of any law. OP questions the use of "should" uncharitably, because the original comment's unstated assumption is clear - society "should" be set up to tradeoff freedom and minimizing collective harm. Violence is not the only form of harm; unregulated banking can obviously cause harm in the society (starvation was pretty harmful in the US during the Great Depression), and so it's valid to question whether or not society should consider how the benefits of private banking (with any amount of regulation) trade off with a public alternative.

fowtowmowcow 3y ago

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 3y ago
Why can't that be the central bank? We don't have private courts?
- fowtowmowcow 3y ago
  I ask again: What happens if the government makes a ton of bad loans that never get paid?
  - danaris 3y ago
    The government would seem to have every recourse to collect.
    - willcipriano 3y ago
      In a manner of speaking. Take a look at student loans, how have they been intending to collect on those lately?
      - 0zemp2c 3y ago
        those loans are being repaid with votes Democrats dangled loan forgiveness at the midterms, bought enough votes to blunt a Republican trouncing...never followed through to reward the voters but no worries, the promise can be re-made for the Presidential election all Biden has to do is offer full loan forgiveness and the election is his DeSantis will counter with auto loan forgiveness (just as big of a problem now), and it will be a battle to see who can buy more votes
    - fowtowmowcow 3y ago
      Hard to collect money on unemployed and dead.

syntaxing 3y ago

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 3y ago
The same kind of behavior happens in the private sector. Since it’s not government, we don’t call it corruption.
- SllX 3y ago
  While corruption is never good, I’ll take private-sector corruption over government corruption every day of the week if I’m forced to choose. Governments are sovereign.
  - pessimizer 3y ago
    The government is corrupted by its relationships with the private sector. The only other way to pull money out of government is through salaries, and government workers don't get paid that much.
    - SllX 3y ago
      Most people are “the private-sector”, it’s called society and includes every voter not working directly for the government, which is most of them. If a government is necessarily corrupted by its relationships with the private-sector, then the word corruption is meaningless in the context of government. You should also mind that governments can also be corrupted—can be but not necessarily are-by their relationships with their own employees. I advise you to find and apply a limiting principle, one that would be useful for you in distinguishing government corruption from government business.
- tastyfreeze 3y ago
  Would you rather have one bank of thousands fail due to corruption or have the one state owned bank fail and the entire economy grind to a halt?

differentView 3y ago

>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.

userabchn 3y ago

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.

SllX 3y ago

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.

akira2501 3y ago

> 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.

opportune 3y ago

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.

pessimizer 3y ago

> 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%.