Hacker News Reader

Comment by roenxi | Hacker News Reader

Peter Schiff tried to run a full reserve bank and was shut down by the regulators. So it is just how the banking system works, but it is by fighting the free market all the way through.

I don't like to recommend podcasts, but in of his podcast [0] he had a really interesting walkthrough of his perspective on the regulators working to shut down his bank. For me it was the most powerful advertisement for cryptocurrency I've heard to date. An opinion that would probably annoy Schiff.

Even if you don't believe in any particular bank, in a 0 interest rate environment a full reserve bank would have been competitive. If you don't get money anyway, avoiding the inevitable crash when rates rose would have been a nice selling point.

[0] https://schiffradio.com/ Ep. 887

View on HN

Matt Levine has explained the Fed's disdain for narrow banking. Fed payments are a subsidy for regular banks, and regular banks are effectively public/private partnerships that make loans, enforce regulations, and generally satisfy the goals of the government. A narrow bank would capture the entire subsidy and not satisfy any of the other goals.

I tried to find an explanation for why the Feds didn't want a narrow bank.

This article has some speculations, but nothing definitive: https://www.chicagobooth.edu/review/safest-bank-fed-wont-san...

It doesn't quite make sense why the Feds don't want narrow banks, except that they might compete with traditional banks (and those banks' deep reaches into the Fed's policy decision makers are forcing out potential competition before they take root).

Fed wants the public savings to fund private sector loans, not public sector spending, which they already do with presaving taxes.

> Peter Schiff tried to run a full reserve bank and was shut down by the regulators

I've heard this before and I very much doubt that is the full story. Does anyone have the _regulators_ side of this argument?

Well, I wouldn't say it was shut down per-say and more of it was never allowed to start. They never got a banking license.

IIUC, the regulator's argument is that people are incredibly interested at putting their money in a narrow bank (aka Pass-Through Investment Entities) such that few people would want to store money not at a PTIE and it would screw over liquidity in the financial market.

https://www.bloomberg.com/opinion/articles/2019-03-08/the-fe...

https://www.federalregister.gov/documents/2019/03/12/2019-04...

Reply on news.ycombinator.com