1) It’s not that they don’t want banks to be too safe, it’s that if theyu’re tha

1) It’s not that they don’t want banks to be too safe, it’s that if theyu’re that safe the money supply will contract, and put the FED in the position of direct lender, or the state in the position of stimulator by spending.
2) -“A bank’s job is to lend and create money. Bank’s that just intermediate between the Fed and consumer would destroy the main purpose of commercial banks.”-
And that is a deterministic end to the past 110 year trajectory. The open question is whether the state or the market would produce a distribution of investments sufficient to saturate all opportunities (leave fewest opportunities unpursued(fallow).)
Additionally –“It is not much of a stretch to have the Fed provide funding directly for banks. Get deposits out of the lending business. Stop paying interest to depositors. Stop paying depositors more when the Fed wants to raise rates.”–
Again, this is where we are headed. (It’s also why the treasury will create digital currency. Especially because that currency activity will give us the economic information the government currently has to wait for – and is always and everywhere ambiguous.
3) -“All banks are equally rock solid from a depositors pov right now, with fdic insurance going from 250k$ to infinite.Aren’t I incentivized to deposit my life savings in the craziest, riskiest bank that offers depositors double digit yields? Its insured now.”-
Well. Guarrantee depositors while explicitly seize investors, and remove executive and board insurance if there is a collapse.
4) ~”Why does the fed prohibit full-reserve ore more than full reserve banking?”~
Because (a) it will push saving into full reserve banks and (b) the fed will not be able to push money into the economy. Once you grasp this you realize that the fed is always baiting the financial sector into hazard. They either lend at the margin in order to competitively survive, or they stretch the margin by some art artistry or circumstance to compete more successfully. (SVB) And finally (c) the current model forces savings into treasuries (bonds) to finance government spending. In other words, the treasury needs banks to carry the government debt. (d) –“The fed wants to be able to put money in the system and take it out when they want. Safe banks means they can never get it out”– Exactly. So, precisely what value does the entire banking system have at this point? The value is in the distributed knowledge of lenders in many markets, and that knowlege isn’t possible to systematize aggragate and centralize. “The pricing of any asset is an individual human’s prediction from the totality of knowledge of the specific circumstance.” In that sense we shouldn’t allow reselling of any debt instrument, only sales of interest in the instrument.
Note that this system does provide maximum incentive for monetary velocity in the economy, but it’s extremely fragile (produces a lot of externalities) when we encounter a systemic shock that interrupts the ‘finely tuned manipulation of human behavior’.

So IMO as in many things the GOVT does not have a bunch of posters on the wall stating
1) The european group evolutionar strategy of prohibition on authority by the reciprocal insurance of self determination by self determined means (freedom), by sovereignty and reciprocity in demonstrated interest, truth and duty to the commons before self and family, resulting in markets in everything (liberty).
2) The laws (principles) of our rule of law, by the empirical, natural(scientific), common law (negative conflict resolution), concurrent legislation(positive preference selection), and government(houses) as a market for the negotiation of commons between the classes, with the president (monarcy) as a judge of last resort, thereby depriving any and all of authority.
3) The US postwar global strategy (replace empires with monopoly trade w federations in free trade)
4) The US domestic economic strategy (keyensian velocity) and immigration to maintain it.

-Curt

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