[mathattack]

The theoretical basis for banks is twofold:

1 - Connecting money providers and money users. This can play out in the big deals that you mention. They provide $2 billion in financing, and line up a bunch of investors on the other side. Additionally they fulfill this in trading securities.

2 - Taking short term money (deposits which can be withdrawn at any time) and funding long term debt (mortgages, long term bank loans). This can only be done by aggregating lots of suppliers of funds, and pooling them together.

I suspect that much of this can be crowd-sourced and disaggregated, starting at the bottom.

[nissimk]

Exactly. If these small players start by acquiring deposits and investment accounts, they will be offsetting those deposits from the big banks. Once the small entrants reach a certain size they will themselves be able to play in the larger financing space thus competing with the big banks in more areas.

Hedge funds have been doing this for years, and some of the largest hedge funds now participate in many of the lines of business that are traditionally thought of as investment banking.

[marcosdumay]

Both those problems can be solved by emiting bills that anybody can buy and sell on a secondary market.

The problems that can not be solved by that are basically how to discover who one should trust enough to lend money, and agregating people to persue unpaid loans.

[markvdb]

The problem of course being that banks have a heavily regulated oligopoly on the _creation_ of money. Banks have a right to lend (a lot) more than they have deposits and capital. Think fractional reserve banking. They effectively create money out of thin air. Kickstarter and friends can't do that.

But the tech sector may come start scratch at the edges. I hope so, together with you!

[mikeash]

Fractional reserve banking doesn't mean you lend more than you have. It merely means you keep less money on hand than the sum total of your deposits and capital. This "creates money" because the depositors still act like their deposits are 100% present, and the debtors have some of that same money to spend. Banks aren't lending more money than the deposits and capital they hold.

[mathattack]

Kickstarter and friends can't, but there are other tech options for creating money, or money-like instruments. Bitcoin and Zynga points are some first steps in that direction. IOUs could be another. Any firm that can give credit is also a move towards money.