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Was it not the Fed that denied The Narrow Bank's business model to pass through demand deposit accounts directly to the Fed? And in their denial letter, they as
by ndriscoll 2y ago
Was it not the Fed that denied The Narrow Bank's business model to pass through demand deposit accounts directly to the Fed? And in their denial letter, they asserted both that TNB would be at too high of a risk of runs (which makes no sense since it'd have 100% reserves) because customers won't have enough other services like lending to make them sticky, but also that TNB would be too high of a risk of causing runs on other banks because it's too safe:
https://www.tnbusa.com/wp-content/uploads/2024/02/TNB-Letter-of-Appeal.pdf https://www.tnbusa.com/wp-content/uploads/2024/02/TNB-Letter...
- toomuchtodo 2y agoThat’s also accurate. I too take issue with the Fed’s efforts to prevent TNB from operating.
- amenhotep 2y agoThe dirty little secret of the entire modern financial world is that the remit of banks is to get people to feel their money is safe, thereby convincing them to deposit it, and then use it to make loans way in excess of how much money they hold, thereby creating the ease of access to capital that the economy needs. And as long as people feel their money is safe, it is safe, because loaning money out is actually pretty reliable if you do it sensibly, the bank will be paid back eventually. Unless everyone wants to take their deposits out at once and buy treasuries instead! It's very reasonable to criticise commercial banking for delivering such poor value to depositors that narrow banking looks like a better option, but regardless, if that's the situation, your choice is between suppressing narrow banking and allowing the collapse of the entire system. You cannot reasonably expect an institution like the Reserve to make the other choice there.