Odd Lots Is It Time For Public Checking Accounts at the Fed?
Mar 23, 2023
In this engaging discussion, Saule Omarova, a Cornell Law School professor and former Comptroller nominee, addresses the implications of the Silicon Valley Bank collapse on trust in the banking system. She argues for public checking accounts at the Federal Reserve, highlighting their potential to redefine banking stability and impact private banks' profitability. Omarova also delves into the historical context of public banking, the risks of private finance, and the critical need for regulatory reform to ensure accountability and safety for all depositors.
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Public Banking Consideration
- Implicit bank deposit guarantees raise questions about the role of private banking.
- If all deposits are insured, a public banking option like Fed accounts becomes more appealing.
SVB Crisis Insights
- The SVB crisis highlights the systemic risk tied to monetary policy changes, not just risky assets.
- It exposes the conflict between private profit-seeking and the public good of safe money.
FDIC Cap Implications
- Removing the FDIC cap eliminates the incentive for large depositors to run on banks.
- However, it necessitates either stricter regulation of bank investments or a public option for deposits.