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Let’s Abandon Financial Reform

I mean it. Screw trying to reform the system. This is the conclusion I’ve come to after a rigorous review of our current economic system.

Sure, our economic stability went to shit when we started peeling back regulations on banks and investment banks back in the 80s. Regulations that by the way, kept us virtually bust free for forty years. And yes, continued deregulation through the 90s and 00s did make for a more volatile and precarious financial system, resulting in shorter boom and bust cycles. But I still say fuck it. We shouldn’t bother to regulate.

I know I sound nutty again, but there’s a method to my madness.

I really believe that our chances of getting the kind of regulation that we had in the 40s in place is pretty damned close to impossible. The financial industry has way too much money invested in our politicians. Our congressmen, senators, and president aren’t about to bite the hand that feeds them. We’re not going to get any kind of reform that will prevent banks from doing precisely what they did to tank the economy in 2008. We’re sure as hell not going to get any regulation that will stop investment banks from creating new “financial products” that could potentially be even more devastating than the financial products that just screwed us. So let’s not even bother. Who needs another long, drawn out battle like the one we just had on health reform, that will leave us almost as screwed as we would be if we did nothing?

I say we leave the banks alone. Let them do what they want to do, completely unmolested by government oversight.

What we should do instead, is start national banks to compete with the private banking system. I’m not talking about taking over the banks. I’m talking about creating new banks.

Right now, Bank Of America, CitiBank, WaMu, Chase, and all of the other banks that are “too big to fail” are borrowing 100% interest free money from the federal government. Money that we had hoped they would use to lend to small businesses so that we could jump start the economy. But they’re not actually lending that interest free money the way that we wanted them to. They’ve calculated that they can make much bigger short term profits if they take that interest free money and gamble it on derivatives. What they’re not gambling on derivatives, they’re lending to you in the form of credit card debt. And they’re charging you an exorbitant interest rate to borrow money that they’re getting for free.

So why not cut them out? Let’s get rid of the middle man and create national banks. We just did this with student loans. We used to let banks be the middle man in the student loan system. It was a great deal for them. They loaned out the money which they got from the federal government and charged interest for it, but were completely insured by the federal government if you defaulted on paying the loan. They got all of the reward with absolutely no risk. So we finally decided to cut them out of the equation. Student loans are now going to come directly from the federal government. The interest that you pay on those loans will now be paid directly to the federal government to keep the system going. Makes sense, right? So why can’t we do that for small business loans, mortgages, and personal loans? Why are we letting private banks interject themselves between us and the federal government who supplies the money anyway?

This would solve every single problem that we face today. We wouldn’t have to worry about the banks being too big to fail because we would have a solid banking system in place. So if you fail, fuck you. We’ll be just fine. A national bank would give consumers more options. We could decide for ourselves if we trust the private system over the government bank. We wouldn’t have to worry about small businesses being left out in the cold by banks that don’t want to lend to them. We certainly won’t be paying 30% interest on credit cards since national banks wouldn’t have derivatives trading to finance. We wouldn’t have to worry about ever bailing out another undeserving bank executive again. And since banks are so averse to government interference, we could stop the FDIC insurance system that we currently provide them. And we can charge the private banks interest on the money that they’re getting for free now.

This is the perfect solution to every single problem that we face. And the banks would get what they want; free reign.

I honestly don’t know why we’re not having a serious conversation about starting national banks. Unless I’m missing something, it seems like the solution to all of our national problems. And it creates more competition. Who can argue with that?