Comment by Retric
9 years ago
> What was the problem that we where trying to fix anyway?
Risk of financial collapse. Banks are risky because they have a lot of leverage, people more directly loaning money may take a 20% hit after a housing collapse, but that's not such a big deal.
The banks that collapsed during the last crisis are not the kind of banks that take deposits and give out loans. They were the kind of non-banking businesses that you talk about.
And one of the reasons for the crisis was “shadow banking”, because many home loans were not really given by banks (some were directly created by other institutions, some were first created by banks but then packaged and sold). The subprime crisis would not have happened, at least to the same extent, if loans had been kept in the balance sheets of banks.
Here is a short list of recent bank failures most of which are very much traditional banks: https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_U...
Including the United States' largest savings and loan association, until its collapse in 2008: https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_U...
You are right, I was thinking of large (systemic) failures and actually I had completely forgotten about WaMu. Clearly forbidding the banking business (as in savings and loans) would prevent bank failures. But I´m not sure the alternative businesses that would fill the void would be much better.
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