[robertlagrant]

> Their whole role in transmitting and keeping an account of money is surely reproducible by the federal government at very little cost (maybe even lower cost due to not needing FDIC and all that infrastructure) without having to pay a middleman.

Banks don't store money. They connect money to businesses in a structured way. No banks means businesses won't get created.

[Retric]

Fewer rather than zero businesses. Rich individuals could directly invest. Where banks shine is in making moderate risk investments which aren’t worth much individually but are a significant economic boost in aggregate.

Housing may be unaffordable, but people aren’t living in sod houses with dirt floors and no running water either.

[robertlagrant]

Going cap in hand to an angel investor for every £10k loan is not viable. And they don't have the levels of cash needed for this.

Why not use banks for this as well?

[Retric]

Get rid of Banks and many different things change.

Some wealthy investors would setup a lending operation using their own cash, based on historical examples of such. They would however need to charge higher interest rates than banks because they would be more capital constrained.

[lotsofpulp]

I specified an (FDIC insured) bank's role "in transmitting and keeping an account of money". There would be nothing stopping a lender from lending if the US government gets rid of FDIC insurance and just provides the people of the US electronic money accounts directly.

[robertlagrant]

Sure, but then what happens to the thing I said? How do businesses get loans? How much interest should be paid on that money, if any?

[lotsofpulp]

Supply and demand determine the price (or interest rate). Businesses get loans the same say any other business transaction happens. A buyer and seller hash out an agreement. This already happens all the time, even in the US (see investment banking).

If the lender, such as a bank, is any good at their job of underwriting, then they won’t need the federal government’s assurance to bail them out and they will still be able to attract funds from people seeking returns (and risk).

[robertlagrant]

> Businesses get loans the same say any other business transaction happens. A buyer and seller hash out an agreement. This already happens all the time, even in the US (see investment banking).

Yes, but a big way small business loans happen is with people's deposited money. You're naming alternatives, but not replacements. If my money is deposited with the government, then I have to go and find someone to lend to myself, and actually have the money removed from my bank account?

[lotsofpulp]

Yes, is this a problem? There are businesses that assist you with this already. Called investment banks. Or the government if you are looking for small business loans via SBA (and the government hires banks to do the underwriting, which the banks can still do).

> If my money is deposited with the government, then I have to go and find someone to lend to myself, and actually have the money removed from my bank account?

Also, you know the savings rate you earn at a bank is not because of the loans a bank makes, but because the government pays the bank. Why do you want your government to pay a middleman before paying you?

There was a time and purpose for this system, before instant communications and electronic databases. Now, those purposes have been automated away.

[klabb3]

Sounds like it could be a variation of the office space skit:

So what would you say you do here at the business factory?

[…]

I connect the money with the businesses because businesses are not good at dealing with money! I have people skills, can’t you see that?