| > in practice the average person puts money in the bank primarily for storage. > If you ask someone why they have a bank account, odds are the answer is not “to make money” > They do it because it’s commonly held financial advice that this is better than putting cash in a box under their mattress (not just for returns, but for safety and ease of access). Well, that's the problem. People actually believe this "your money is safe at the bank" common sense. Tell them otherwise and they treat you like you're one of those tinfoil hat crazies. Maybe they'll believe otherwise when the banks fail and their money is lost. > It is not fair to lump these people in with shareholders, in terms of profit expectation, and say they have just as little right to their money back. Sure it is. They loaned their money to the bank. They exposed themselves to the risk that the loan would not be paid back. That they were ignorant of what they were doing does not somehow excuse them of their culpability. > I’m sure you have a stash of money somewhere for paying bills I have exactly $0 in my personal checking account. All expenses are paid with credit. Then I pay the bank off in full the second money enters my account. Any and all remainders are immediately invested until $0 remains. > You probably also have a larger stash as an emergency fund, which doesn’t need to be as immediately accessible but still needs relatively quick access (so a CD won’t cut it). My emergency fund is about the only thing I keep in a bank account long term. In several liquid investment accounts in different banks. With full knowledge these banks could flop at any moment. > I guess your personal stashes might be small enough to be FDIC insured, so maybe pretend to be a small startup with a couple millions in cash. In my country, bank accounts are insured up to some amount per bank per our social security number equivalent. Therefore, when that amount is exceeded, I spread them over multiple banks. If money accumulates to the point I can buy real property, I immediately do so instead of leaving it at the bank. It's a pretty simple algorithm. > And regarding your point on banks hating to sit on money - they have to make money somehow as they have bills to pay. Or they could charge you for the storage service instead. Maybe if banks were in the storage business it'd actually make sense to pay them a single cent in fees. They're not, so it doesn't. > Not if the FDIC successfully makes everyone whole without spending taxpayer money! Which, again, seems like a positive outcome no one should be rooting against. Yeah, and everyone just keeps on believing in banks. Positive outcome for them, not for society as a whole. |
I think from your POV that banks are horrible, thinking that even depositors should lose their money is in fact a defensible argument. So I concede that your view is one I can respect despite disagreeing.
But in my view, banks are a useful fiction because of the utility they provide (specifically easy storage of and convenient access to money). Even if a person can buy property to reduce bank risk (again, a super inconvenient workaround!), I’m not sure I want _businesses_ to be doing so, especially in light of the likely resulting impact on property values. I acknowledge a system relying on banks indeed has risks, but to me that’s a stronger argument for better regulations and protections to mitigate the risks than it is an argument to dissolve the system and lose its benefits.