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Old 04-20-2017, 08:42 AM   #1
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Default The case for Banking anarchy .

Quote:
“The function of credit in a simple society is, in fact, remarkably egalitarian.
It allows the man with energy and no money to participate in the economy more or
less on a par with the man who has capital of his own.

Virtually all my life I have accepted that banks should be controlled
and regulated , however after reading this article I wonder if we
are doing it upside down .

..
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Old 04-20-2017, 09:10 AM   #2
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The case for allowing banks to take on more risk of a different type .




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Old 04-20-2017, 05:01 PM   #3
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I'm all for all for allowing them to take on more risk. But if they eff up, they're on their own. Now bailouts; no moral hazard; no socialization of losses and privatization of gains.
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Old 04-21-2017, 08:43 AM   #4
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One thing we have learned over the last couple centuries is that societies need deposit insurance (people's checking accounts being safe). Without it, you get frequent bank runs since the very fear of a bank-run can cause a bank run. Hence we have the FDIC. All countries have some version now.

And since we have the FDIC, we can't let banks go crazy.
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Old 04-21-2017, 10:13 AM   #5
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Maybe a stronger differentiation between investment banks and depository banks?

No FDIC for investment banks, no "too big to fail" either.
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Old 04-21-2017, 10:17 AM   #6
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Quote:
Originally Posted by A.T. Hagan View Post
Maybe a stronger differentiation between investment banks and depository banks?

No FDIC for investment banks, no "too big to fail" either.
Agreed. I-banks don't need FDIC and should be allowed to fail. Unfortunately almost all large banks are depository these days, with only a couple exceptions.
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Old 04-21-2017, 10:23 AM   #7
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It wasn't always that way though, was it.
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Old 04-21-2017, 10:38 AM   #8
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No it wasn't. Largely the result of mergers over the last 15 years or so.
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Old 04-21-2017, 10:46 AM   #9
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Banking is a dying business. The three functions it has, deposit, credit, transfer are challenged by technology and new business

Transfer function is dead, there are 1,000 of alternatives to bank transfers which are slow, expensive and bureaucratic.

deposit, again for the investor there are many legal and more profitable alternatives of investment, as the money is changing into digital, safe havens to store becomes more and more accessible

credit, the article has it to the point ...
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Old 04-21-2017, 10:47 AM   #10
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Quote:
Originally Posted by Dietrich View Post
Agreed. I-banks don't need FDIC and should be allowed to fail. Unfortunately almost all large banks are depository these days, with only a couple exceptions.
If there was no regulation you would think people would be much more careful who they trusted and reputation would mean a whole lot more as now people see "FDIC' insured and assume the institution is reliable.
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Old 04-21-2017, 10:49 AM   #11
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Deposit insurance is precisely the sort of thing that Sysiphus is talking about. If I own a bank, and I know that all my depositors' accounts are backstopped—I screw up, everyone is made whole, and no one sues me, or lynches me!—then I am emboldened to take greater risks in an attempt to reap greater profits.

No government insurance? People actually shop for safer banks, or willingly take on greater risk with more freewheeling banks, which wiil probably pay higher rates on deposits. Competition weeds out the weak sisters, entrepreneurs compete for deposits, the banking system is stronger, and we don't have debacles like 2008, the godless love child of insane government regulation (CRA, et al) and government guarantees.

BTW, things are worse now than then, it can be argued. The FHA is basically the mortgage lender of last resort now. It's nuts.
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Old 04-21-2017, 12:38 PM   #12
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Pretty much everyone above is right one way or another. If the feds get out of bank regulation, a private sector solution will pop up. Could be deposit insurance, could be a private certification process, etc. As Oric has pointed out, gone are the days where banks had to have a large physical network. With the internet, banks can do business just about anywhere. Likewise, the results of any certification or other private, "soundness" rating system would presumably be available for all the world to see with the push of a button. Money would flow to banks with sound lending and investment practices and flow away from those with shoddy such practices.

The problem with the Fed is that, like all government programs, they are playing with other peoples' money. So, there is no real incentive to truly rein in bad practices. The private sector would be much more disciplined because companies that provided deposit insurance would have to answer to their investors.
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Old 04-21-2017, 12:48 PM   #13
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Quote:
Originally Posted by dharma View Post
Deposit insurance is precisely the sort of thing that Sysiphus is talking about. If I own a bank, and I know that all my depositors' accounts are backstopped—I screw up, everyone is made whole, and no one sues me, or lynches me!—then I am emboldened to take greater risks in an attempt to reap greater profits.

No government insurance? People actually shop for safer banks, or willingly take on greater risk with more freewheeling banks, which wiil probably pay higher rates on deposits. Competition weeds out the weak sisters, entrepreneurs compete for deposits, the banking system is stronger, and we don't have debacles like 2008, the godless love child of insane government regulation (CRA, et al) and government guarantees.

BTW, things are worse now than then, it can be argued. The FHA is basically the mortgage lender of last resort now. It's nuts.
IMO medicine and everything should be deregulated and we might not only see price competition but better quality.
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Old 04-21-2017, 03:05 PM   #14
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Quote:
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IMO medicine and everything should be deregulated and we might not only see price competition but better quality.
I will quibble with the world "deregulation", the same way I quibble with "legalization" of gay marriage—the problem for me is that we speak of legalization of gay marriage with the implicit, unspoken assumption that the state possesses the right to interfere with the actions of consenting adults in the first place. Legalization of one's sexual proclivities should be given the same intellectual weight as legalization of one's breathing: an obviously ludicrous action even in concept.

That said, since you mention medicine specifically and since I have some small experience with it, I will say that absolutely, government should have no brief in the conduct of medicine, but that absolutely, medicine should be regulated: by private, voluntary associations set up for that task.

As one of my brilliant, if crusty and curmudgeonly, pathology attendings once said, "you're always right if nobody checks your work". You'd be surprised how often the cause of death on the chart was in disagreement with the cause of death we discovered on post-mortem exam.

Oversight is necessary. But not government oversight. Government makes a hash of everything else it touches, and I would guess that fully 50-75% of the cost of medicine at present is a result of badly thought out mandates, idiotic regulations, and crashingly stupid, counterproductive laws.

How could it be otherwise? Pick something incredibly complex that you know nothing about. Now imagine yourself with total power to manage it, to "regulate" it. How good a job do you think you're going to do?

I would give the job to voluntary organizations. I would have individual doctors, practices, groups, hospitals sign up, or reject the idea. I would let the market figure it out.

Person A: "I see Dr. Jones! He doesn't pay anyone any dues! He's really cheap!"

Person B: "Yeah, well, Dr. Jones got his medical degree from the University of Djibouti, and he's not signed up with any accreditation society! I see Dr. Smith! He went to Yale, and he's accredited by the Sure Thing Doctor's Guild!"

Person C: "Those Sure Thing folks take anybody! My doctor belongs to the High and Mighty Surety Society, he's triple-boarded by their credentials committee, and he fixes ingrown toenails for free!"

You would doctor shop like you car shop, and with the same aim: the best, safest deal you could get for the money you're willing to pay. Costs would drop, quality would improve (doctors are already generally excellent, IMHO, but the bad ones might not stay in business, and the good ones wouldn't have the government on their back).

Nirvana? Assuredly not. But a lot better than what we have now.
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Old 04-21-2017, 03:53 PM   #15
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The revolution is already in progress: bit coin.

As for medicine, the bad doctors go off to become hospitalists. It's cheaper for insurance companies to add in one more layer of bureaucracy in the long chain of hoops that need to be jumped through for life-saving procedures to be approved. From my personal experience this past year, I honestly think the requirements of insurance companies have been introduced in order to withhold treatments so that the patients will die before receiving costly procedures. Add to that hospitalists who won't or don't have time to read patients past histories, including allergic reactions to medications. Rant over hospitalists fine. Back to your regularly scheduled thread.
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