A large percentage of the Bitcoin community's view on this front appears to be "past regulations have occasionally failed, therefore we shouldn't have any regulations." This makes no sense. It would be like your home being broken into and so you decide that you are better of leaving your door unlocked.
Couldn't agree more. TLDR: bring back Glass Steagall.
Oh, were you just repeating an Occupy Wall Street meme?
The reason Glass Steagall is important is because it stops commercial banks from needing to behave like an investment bank. Especially with publicly traded banks, you have entirely different types of investors with different expectations investing in investment banks vs. commercial banks, and that puts a huge amount of pressure on the commercial side of a merged bank to behave with similar risk profile to its ibank sibling. When they aren't merged there is significantly less pressure to buy higher risk securities. I think there's huge value in having both an aggressive ibanking system and a separate, stable commercial banking system, so yeah, I think we should bring back Glass Steagall.
The occupy wall street quip is unnecessary, don't do that stuff.
How are investors putting pressure on a bank? Investors are the owners of the bank, they don't "put pressure", they manage their property. Investors will want their property to grow and issue dividends as much as possible - investment bank or not. Calling it a deposit bank isn't going to change that.
The risk profile of investors is also not a consideration. More risk aggressive investors can simply leverage themselves. Investors want the risk level that's appropriate for the business. They may disagree on what that level is, but that disagreement will stem from different strategic outlooks and not from personal preferences.
An again: so ibanks cannot fund investments from deposits? That becomes entirely irrelevant the minute you have a liquid commercial paper market. Instead of investing deposits, the ibank will simply borrow money short term from a bank that has deposits. This is what happened in practice. It even happened with companies like GE which became de faco ibanks thanks to their high credit rating.
And yes, this means the deposit bank will be exposed to the risks the ibank is taking. If you want to regulate that out, you'll have to require banks be entirely in cash or treasuries. Glass-Steagall won't do.
*Edit: /s/customers/investors
> Investors want the risk level that's appropriate for the business.
How do you determine the appropriate risk level for a business half of whom's goal is to provide explosive growth and half to provide long term, stable, lending?
> They may disagree on what that level is, but that disagreement will stem from different strategic outlooks and not from personal preferences.
I agree entirely. Don't you agree the strategic outlook of an investment bank is entirely different than that of a commercial bank?
I do which is why banks will specialize in different niches regardless of regulation.
No law prevents a cement making company from leveraging itself like crazy and invest it all in high risk / high reward biotech research. And yet you don't see that happening.
Also, you fail to address the argument that a liquid commercial paper market gives ibanks de facto access to deposits.
And yet we did see commercial banks taking massive risk and going bankrupt because of it. Maybe that's ok though, I could certainly buy the argument that that's just the market.
> Also, you fail to address the argument that a liquid commercial paper market gives ibanks de facto access to deposits.
I don't know what you mean by that. Do you mean ibanks can buy publicly traded commercial bank stocks?
Edit: And let's bring this back around: if this is not the appropriate regulation, what is? Open to hearing something better for sure.
The depositors were insured, so the depositors didn't care. The bank shareholders had a free call option from the federal government in the form of an an implicit bailout guarantee, so they were incentivised to take as much risk as possible.
> I don't know what you mean by that. Do you mean ibanks can buy publicly traded commercial bank stocks?
Without Glass-Steagall: commercial bank takes 90$ from Joe's 100$ deposit and invests it in leveraged CDO^2 on Bhutanese real estate.
With Glass-Steagall: commercial bank takes 90$ from Joe's 100$ deposit and buys 30-day debt from an ibank. The ibank use the money to invest in leveraged CDO^2 on Bhutanese real estate.
And surely you're not going to prevent a bank from making loans, that's their whole raison d'etre (safekeeping of money is incidental).
Short of getting rid of central banking, I don't think you can do anything about this.
- ACH/normal bank transfers take days
- Files and money transfers are handled via SFTP
- There's no checks in place to see if the account transferring the money actually has enough funds. The money is moved and rolled back once the bank finds out
- It's legitimately difficult to move or accept non-cash payments through a bank (without Stripe/Braintree etc.)
- Checks are still valid
- Banks charge for incoming transfers (I don't understand this still)
It's more like it has had to do well; it's all we have had. Compared to Europe, it's really not great.
There is a much better alternative out there now. And it's tenable.
A lot of my main comment was more about how the Fed/Govt handled/handles the fiat currency of the US and the bailout. On those fronts I think we are doing significantly better than the Euro and Europe's response to the financial crisis.
It is extraordinarily easy to point out how shitty a job the Fed has been doing from a society that completely depends on it. When you compare how the American financial system has been doing compared to the rest of the world the results are astoundingly in our favor.
I find it difficult to understand how Bitcoin enthusiasts can so thoroughly discount how well our current system actually functions. There are no questions that there are deficiencies in the current system, but the Btc community hasn't seemed to even identify what they actually are, much less propose solutions in any reasonable way.
Propose, for instance, how HSBC would be prevented from laundering money for literal international terrorists and drug dealers. Or remittances, another Btc enthusiast favorite: do you really think the fees you are paying Western Union are related to flipping bits and not to keeping massive stores of cash, securely, in remote locations? Maybe some day cash wont be necessary, but we are extremely far from that point, and until we are there Btc remittances are essentially useless.
> That some part of "The Government" thinks they can regulate something that is not theirs is laughable.
That some part of our culture thinks it is reasonable to create a new currency and not have the government regulate it is laughable.