| >But why would you need a private corporation to put peoples money in T-Bonds? Why not just make the government do that directly What you're describing is pretty close to a "narrow bank", minus the "owned by government" part. The Fed doesn't like it for several reasons: >The Fed raises three main objections. 3 The first is macroeconomic: The Fed worries that narrow banks could mess with the implementation of monetary policy, because if they succeed they will keep a lot of money at the Fed, increasing the size of its balance sheet. 4 They might also make other short-term interest rates (like fed funds) more volatile, because people who would otherwise participate in those markets might park their money at narrow banks instead, making it harder for the Fed to target interest rates. 5 >Second, it worries that narrow banks will take funding away from regular banks, making it harder for those banks to trade stocks and bonds (a business largely funded by repo), and maybe even making it harder to make loans: >Third, the Fed worries that having too safe a bank would be bad for financial stability: In times of stress, everyone will flee from the regular banks to the super-safe narrow banks, which will have the effect of bringing down the regular banks. https://www.bloomberg.com/opinion/articles/2019-03-08/the-fe... |