3 ms·

So you’re making the argument that because you don’t personally care, it doesn’t matter?

gumby 4y ago
Good question. My example of a car factory closing is also one where I don't personally care but do care about the jobs loss and (less so but for that matter) the size of its impact on the economy. There are many such. But banks specifically are no longer that important. The US federal government now backstops all deposits, as they have (for almost a century) underwritten all residential mortgages. I don't think that's a bad thing at all; overwhelmingly most people's interaction with the bank is a current account (checking/savings); and overwhelmingly most peoples' liquidity is less than the FDIC limit, not that that limit may be meaningful any more. The development of the FDIC was a crucial and early product of the New Deal and stabilized the system significantly. Thus, for this crucial function, I couldn't care less if banks themselves succeed or fail. Like food safety, judging the risk profile of a deposit taking institution is beyond the capability of most people to evaluate. But what about the residual functions of banks? They are mostly unbundled at this point. You don't need to get a credit card from your bank and most people carry such cards that don't come from their bank. In consumer loans (mortgages and small business loans) a local bank arguably knows the local market better than a megabank, and credit unions demonstrate this. But these days banks operate more like mortgage origination companies since the mortgages are bundled into MBSs. That's a function that need not be provided by banks at all! Instead have them be sold by brokerages the way insurance is sold. Safe deposit boxes, to the point they still exist, are outside banks these days. And so on. Of course there are jobs, but retail banks only employ a couple of million in the US (about 20% of the whole financial sector, which is smaller than manufacturing, constuction, and other fields). An unbundling as I'm talking about would probably not affect employment much. So yes, I don't care much about the banking sector at all.

Good question. My example of a car factory closing is also one where I don't personally care but do care about the jobs loss and (less so but for that matter) the size of its impact on the economy. There are many such. But banks specifically are no longer that important. The US federal government now backstops all deposits, as they have (for almost a century) underwritten all residential mortgages. I don't think that's a bad thing at all; overwhelmingly most people's interaction with the bank is a current account (checking/savings); and overwhelmingly most peoples' liquidity is less than the FDIC limit, not that that limit may be meaningful any more. The development of the FDIC was a crucial and early product of the New Deal and stabilized the system significantly. Thus, for this crucial function, I couldn't care less if banks themselves succeed or fail. Like food safety, judging the risk profile of a deposit taking institution is beyond the capability of most people to evaluate. But what about the residual functions of banks? They are mostly unbundled at this point. You don't need to get a credit card from your bank and most people carry such cards that don't come from their bank. In consumer loans (mortgages and small business loans) a local bank arguably knows the local market better than a megabank, and credit unions demonstrate this. But these days banks operate more like mortgage origination companies since the mortgages are bundled into MBSs. That's a function that need not be provided by banks at all! Instead have them be sold by brokerages the way insurance is sold. Safe deposit boxes, to the point they still exist, are outside banks these days. And so on. Of course there are jobs, but retail banks only employ a couple of million in the US (about 20% of the whole financial sector, which is smaller than manufacturing, constuction, and other fields). An unbundling as I'm talking about would probably not affect employment much. So yes, I don't care much about the banking sector at all.