Lawrence York

Commercial Banking: What Went Wrong?

Wonderful articles and a good summary of the evolution of banking.
Of course the 'claimless credit' is fact not claimless at all as the claim is on tax revenues of which the assumption in Washington is that its endless.
The other interesting insight is that in the current Depression, if indeed we do not avert it, the root cause was not in the stock market, but the debt market. And looking at the parallels with 1929 the other three major differences are that this time the leverage was not 100% but 4000%; that this time we have the FDIC to insure bank (and money market) deposits and are bailing out the too big to fail; and this time we're printing massive amounts of new money to fight a symtom--deflation--when in fact prices are simply falling to their mean. Neither time did we have a Glass Steagall Act in place and this time their is a power grab by the very regulators whose largess to their constituents created the problem.
So in conclusion, I agree the system is broken and must get back to the basics of sound lending practices for real value produced. And if we are to guarantee deposits it must not be put at risk. If investors on the other hand want to speculate they should do so, but not with or through a bank where the taxpayer's money is at risk. That said, now we have come full circle to see that the real issue is that banks have morphed into a position where they seek, through their regulators who desire to self-perpetuate themselves, to keep a competitive advantage of using deposits with guarantees to compete with investors for higher profits than otherwise available on risk-free money.