> What is perplexing is the government has not allowed a “narrow bank” that simply passes deposits into treasuries, which would be much safer. The reasoning he

> What is perplexing is the government has not allowed a “narrow bank” that simply passes deposits into treasuries, which would be much safer. The reasoning here is contentious but straightforward. Narrow banking is safer banks cannot over-leverage themselves in the same way and cause a financial crisis. This means the existence of a narrow bank will very quickly kill fractional reserve banking; why would you as an individual take the extra risk? Why might that be a problem? Proponents of fractional reserve banking say that the higher volume of loans it enables collectively allows society to take larger risks that result in higher quality of life over time. Without that volume of loans you'd see less housing being built, less small business loans, etc. The argument goes that the crashes are worthwhile for the overall effect on the economy. Whether fractional reserve banking is a net good over narrow banking is up to debate but the game theory behind why they cannot coexist is hard to argue with. Individuals will overwhelmingly take the choice of "less risk" and switch to narrow banking.