What Is A Good Bank?
Editorial by Boyd Evan White
“Banks make money”, the only way this is true is via the refinement, “Banks make money for themselves.”
Technically, it is the U.S. Treasury Department and its subsidiary the U.S. Mint that certify what is American money; they “make” the money; the source or content of current U.S. money being the topic for another discussion.
Likewise, it could be said, “Boyd Evan White makes money”…ayep, refined as, “Boyd Evan White makes money for himself.”
Banks, as private businesses, provide services and products; banks in this context are not affiliated with the creation and maintenance of the actual monetary system itself.
At an extreme it might be said, “Banks make a demand for money,” since Banks provide loans and people submit for the money the loans provide, but that is not in any stretch of the imagination to equate with, “Banks make money.”
Alas, an understanding of this is not prevalent in America.
What, then, is a good Bank?
The best Bank will keep a 100% reserve of its customer’s money. Since nothing is for free this connotates that the Bank would charge a fee to its customers based on the existence of the bank account, how much money is in the account or the number of transactions they engage in; thereby “making” money for the Bank. This means a total “run” on the Bank, at any time, will result in 100% of the Customers immediately getting 100% of their money back on-demand and the Bank simply going out of business. Any customer who did not get their money back could begin criminal charges against the Bank.
What about “Free Checking” and “Free Savings” Bank accounts? One reason a Bank can provide these services for free is because they engage in Fractional Reserve banking. The Banks use a fraction of their customer’s money to make loans and/or investments from which they “Make Money” for the Bank in the form of fees and interest.
If you as a private citizen give your money to a Bank that engages in Fractional Reserve banking methods without contractually agreeing to the terms whereby you can get 100% of your money back, “Whose fault is it when you don’t get your money back?” If you don’t get 100% of your money back there are only two things that pertain: 1) You did not read the fine print or any print at all on the conditions you were giving your money to the Bank and there was a loophole releasing the Bank from all liability, or 2) The Bank engaged in criminal mismanagement and should be prosecuted for fraud and/or theft.
There is no need for government intervention with Banking businesses. Criminal law and Contract law more than adequately protects private citizens from Bank’s maladministration. There is no need for government to engage in the FDIC, Glass-Steagall, or Basel I, II, III or any of the other nanny-state interventions.
If you want the “free” services of a Bank that engages in Fractional Reserve banking then do so with the advice to make sure the terms (contract) will allow you to get 100% of your money back.
Leading to the question, “What would those terms look like?” Since the fraction of the reserves the Bank lends out or invests probably cannot be liquidated on-demand when there is a “run” on the Bank, where 100% of their customers demand to withdraw 100% of their money, it stands to reason that the terms by which the customer would get 100% of their money back would take time as the Bank calls in the loans and liquidates its investments. Under no circumstance should customers not get 100% of their money back without there being criminal charges for fraud and/or theft against the Bank.
Here are some simple terms to make sure a Bank that engages in Fractional Reserve methods will contractually be obligated to return 100% of your money; removing the need for government nanny-state intervention if the contract is respected.
1) This Bank engages in Fractional Reserve banking methods.
2) Checking and Saving Accounts with this bank are free.
3) The amount of Fractional Reserve of the customers money is set at __%. The amount used by the Bank for loans and investments is set at __%.
4) There will be a monthly review by an independent CPA firm to make sure this Bank never lends or invests more than the stipulated fraction. The CPA’s finding will be made readily available to its customers and its independent insurer.
5) This Bank reserves the right to go into a State of Emergency in the event there is a run on the Bank. The conditions by which this Bank will return 100% of its customers money are:
5.1) This Bank will no longer make loans or investments if it is in a State of Emergency.
5.2) Customers can immediately withdraw __% of the money in their account.
5.3) After four months Customers can withdraw __% of the money in their account.
5.4) After eight months Customers can withdraw __% of the money in the account.
5.5) After one-year Customers can withdraw the remaining balance of their account.
6) This Bank will take out insurance with an independent insurer to make sure that 100% of our customers money will be returned to them; at the very latest one year after the State of Emergency was declared. This insurance will cover any gap left over, after the loans and investments are liquidated, to make sure the Bank is not liable to criminal charges of fraud and/or theft.
There are many types of relationships customer’s might have with their Bank; for instance, under the terms listed above a customer might have an account they want 100% of their money from and they might also have a loan that will be called in under a State of Emergency so they can get 100% of their money back. The complexity being mitigated by the desire to do good honest business and keep the government from intervening.
There is no need for the government to be involved in the Banking industry. There is every reason for a free people to know how a good Bank conducts business and if they want Banking services or products choose to do business with those good Banks. If business is done with a bad Bank expect bad business to be the result; if the government props up and supports bad Banks then expect the government to become infected and degenerate into bad business.
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