The book deal aspect was interesting also. So, the guy profits and has a potentially lucrative book deal with minimal jail time.
It's also what Sam Bankman-Fried and others did in exchanges that acted as unregulated banks.
The system is not perfect and there are many scandals but if you compare it to what happens in crypto exchanges, its a day and night difference.
Running a machine as intended and screwing up is different from pretending doing one thing and actually doing something else and screwing up. This is also why bankers and fund managers don't usually go to jail when they lose clients money. It's not illegal to suck at your job as long as you follow the rules.
https://www.spglobal.com/marketintelligence/en/news-insights...
That are guaranteed by the US Government up to $250,000. While the average person may not know the details, the average person’s faith in the banking system is well founded. That’s why these “alt-banks”, which avoid FDIC or NCUA coverages, are so problematic.
"Moderating risk" = depending on the US federal government bail you out?
There really is no need for the charade of banks now that electronic databases are very solid technology. 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.
It impossible for a bank for example to put all their money into Dogecoin because someone got a hunch that Musk will tweet about it. To do that they will need to create some kind of instrument that allows others to bet on Musks tweeting habits.
> There really is no need for the charade of banks now that electronic databases are very solid technology. Their whole role in transmitting and keeping an account of money is surely reproducible
That's not what banks do. You can do that without being a bank, like PayPal did. Most places will have different and much lightweight regulations than banks for this and you will go to jail if you do anything more than holding and transmitting customer money.
Banks' job isn't just keeping money safe and doing transactions. It includes maturity transformation as well.
Banks don't store money. They connect money to businesses in a structured way. No banks means businesses won't get created.
Yes, this is correct. The bank does it in a somewhat government controlled fashion, with checks and balances, which the world has been fighting for a millennia, if not more. And the guy inside does it with stolen money, for personal gain.
Consent, for one, is a difference between the two actions, if we're talking morality.
Consent is a difficult topic though, I agree. For example, what choice does a person have, not use banks at all? I don't think that's realistic.
Retail banks hold their assets in various forms (central bank reserves, bonds etc.) but can’t really ‘invest’ because they can’t accept the risk.
They make most of their money on lending, but can’t actually “lend deposits” because they are on the wrong side of the balance sheet. The bank levers up capital (money that shareholders have put in as well as retained earnings from previous years) to lend from.
Deposits do count as liquidity and are a fairly inexpensive form of it, which is why banks want you to move money into them and pay interest to encourage you to not transfer them out.
If the bank came into your home, took money without your consent, gambled it on high-risk activities, then tried to replace it before you noticed that would also be bad.
But that’s not what banks do. People deposit their money at the bank consensually and with an understanding that the bank’s activities are regulated within relatively strict frameworks.
I don’t understand if you are trying to downplay the severity of criminal embezzlement by bank employees or trying to demonize banks, but the two scenarios you’re equating are nothing alike in terms of consent, regulation, risk, and criminality.
Deposits are an asset AND a liability
> This means banks in the modern sense can literally create money, so they don’t need your deposits
Not really. Banks still have to spend central banking money when doing interbank settlements, and deposits are an important source of funding to day-to-day operations.
Say you have an account within Chase and want to send money to your friend at JPMorgan, Chase can't simply "create dollars" - they need to have enough reserves in their Central Bank account.
As a thought experiment, if you started a bank from 0, how do you pay out the first loan?
Yes, they create money, but deposits are a requirement to do it. (Unless you are doing some interest rate arbitrage by getting a loan from another source)
Deposits, although an important source of funding are not a requirement, capital is. There are capital requirements that make starting and running a bank a fairly expensive enterprise - you need to put up a lot of your own money (equity) for use.
