"The problem is that his proposals ignore the economics behind banking. If you take someone's money and put it in a vault, how can you provide interest on that money?"
Except that he said this:
SafeBank would maintain a reserve level 2-3x higher than Fed requirements and any other bank.
What he's saying is this. SafeBank would be less risky and could spend a LOT less money. Revenue would be lower, but he's saying that spending at financial institutions is nigh ridiculous and could more than compensate for it.
"And he hasn't satisfied the most important question: how would this be better than a member-owned credit union?"
How is that the more important question? What if it was just as good as a credit union?
How much better is Starbucks? I think 80% of what he's talking about is a marketing opportunity.
>SafeBank would maintain a reserve level 2-3x higher than Fed requirements and any other bank.
Which, for the record, isn't full-reserve (the legal limit is 900% leveraging... i.e., if I deposit $10, the bank can loan $90 off of that). He'd still be loaning out money he doesn't have, and he'd still be able to generate revenue from that.
In the case of full-reserve banking, you can still make money. You may not be able to offer FREE CHECKING and free x x x x blah blah blah, but with the interest accumulated from your loans, a decent amount of working capital, and fees from accounts it's definitely conceivable.
You're referring to a simplified description of the effect of a 10% reserve requirement on the money supply. If you deposit $10 into a transaction account, the bank may lend $9 of that (not $90), and only if you assume each dollar lent is deposited into a transaction account with the same 10% reserve requirement do you get the net effect on the entire money supply (mostly through other banks) of +$100.
In practice this does not happen. And in any case, no one lends money they don't have, as you put it, unless you have strange ideas about what constitutes money.
Yes, that is correct, individual banks do not loan out money they do not have, but the collective system does.
And I gathered that he wants to be separate from that system and therefore not take part in fractional reserve banking.
If he were to explain in detail how he would have 2-3x more reserves than the banks and not take part in the fractional reserve banking system, he would clear up some of the confusion.
It wouldn't even cover your costs. Most bank current accounts are run at a loss for the bank, and just operate as a loss-leader for other products the banks sell. A current account costs in the region of a couple of hundred dollars a year to run (see countries which charge for current account services).
Assuming the bank is making an (adjusted) return of 2% on your money, the account has to have 10k in it even to break even. Very few current accounts do.
Except that he said this:
SafeBank would maintain a reserve level 2-3x higher than Fed requirements and any other bank.
What he's saying is this. SafeBank would be less risky and could spend a LOT less money. Revenue would be lower, but he's saying that spending at financial institutions is nigh ridiculous and could more than compensate for it.
"And he hasn't satisfied the most important question: how would this be better than a member-owned credit union?"
How is that the more important question? What if it was just as good as a credit union?
How much better is Starbucks? I think 80% of what he's talking about is a marketing opportunity.