The intention of a bank (retail/traditional banking) is to act as a intermediary between savers and lenders. Without this intermediary, there are enormous search costs and default risk. The bank is suppose lower search costs and to do due diligence to ensure only loans are made out to credit worthy borrowers. They are providing a service and should be paid accordingly. This is what traditional/retail banking is. Hopefully that didn't come across as attacking your post, but the 07-08 financial crisis had a lot to do with the non-retail banking sector acting like the retail banking sector without the regulation and capital requirements. Mortgages use to originate from retail banks to the customers, but investment banks began packaging mortgages together and this allowed rates to be reduced (good innovation that helps in home ownership). However, with mortgages being quickly shipped to the next party, (retail) banks became increasing lax (as they would not be holding onto it). Long story short, these products were treated as very safe securities and used as collateral in the overnight market. Lots of incentive issues, regulation, and other problems led to the financial crisis. The retail banking model is however very standard and I don't think there is any issue with it (although you could make points about being ripped off in fees, etc., I am just referring to the basic framework of retail banking).Since banks are such important entities, I feel like we cannot leave it in the hands of corperations, so how about non-profit banks?
One of the "products" these banks could offer is being a sorts of broker between parties to let them get to a lending contract. As compensation, the bank would recieve a certain percentage of the intrest paid.
I get frustrated by fees, fines, etc., but the thing that makes me uneasy about their system is the leveraged nature of the whole thing. Don't get me wrong, I know that in some way, it has to be done, but I think they are overstretched. I'm clearly no economist, but the idea that my bank can lend out like $15 for every $1 it has in deposits seems strange to me. I feel like it is an inflationary worm that just keeps crawling out of control. It doesn't sit well with me that they can earn interest on such a huge multiple of money they don't actually have.They are providing a service and should be paid accordingly.
Exactly this is what worries me and it is the exact same problem which the little girl talked about. (shamelessly ripped from thenewgreen's reply) I'd like to see this changed for a safer economical system, but it seems I would like to see quite a lot changed...I'm clearly no economist, but the idea that my bank can lend out like $15 for every $1 it has in deposits seems strange to me.
It doesn't come across as attacking. I am here to discuss and learn, not to force my views upon others. If I wanted to do that, I would have to seriously reconsider my career choice ;-) I have been thinking this over, and it seems like you are right. The traditional system is a reasonable system. The bank acts as a safeguard for the costumer (unless the bank fails) and receives money for making the right calls. Yeah, I can agree that this is indeed a valid and sustainable business model and actually providing useful service. But how about the power these banks have over people (even when we don't take fees, fines etc. into account). The whole financial lives of people are dependant on checking accounts they have with one bank. I am talking about the infrastructure. If I don't want to hand over some power over my own money or when banks don't want to accept me as their customer, I cannot participate in society. I cannot receive payments nor can I make them. That is also part of what worries me, not just fees and fines. It's the tremendous amount of power these banks hold.