I don't agree with Taibbi and Kutner's solution but their characterization of the current situation is spot on.
Like Bill Bonner, I am beginning to feel for the poor banksters. Everybody loves to hate them. But hating the bakers, is akin to hating the Drug dealer, or the welfare queen. All are simply working within the system fostered by Congress. Fractional reserve banking gives the banks the power to create credit derives money out of thin air. With that kind of power the bankers can control the agenda by byiing the leadership of both parties. The PBS discussion clearly demonstrates the power of the Bankers, but misses the most important problem of all, the license to create money , grnated with each banking charter. Neither the Bankers not congress, nor the Press understands the first thing about why fractional reserve banking is akin to counterfeiting and the liquified sand upon which the entire edifice of finance rests. I have talked to Bank Presidents and major players in mortgage derivitives, to and credit card issuers. None are even aware that fractional reserve banking is the root of the peoblem. Almost universally they accept the keynesian view that finacial instability is somehow mysteriously ordained in the capitalist system. this belief is also strongly defended, as to have any other belief wouldn't be god for business as usual. The only banker I know who actually gots it is Derek.
The ideal solution is to get the state completely out of the money business. five thousnad years of history indicates that free market banking would gravitate toward using gold as it's underpin of stability , trust, and convenience, the metal being of suficient above ground stock to be immune from short relative to annual producetion to be difficult to vay in quantity over time, scarce, total world supply mined in all history isa cube 30 meters square witha few centimeters added every year, it also divisible, portable, durable, and testable.
The conveniences of modern finance would stil be available, such as ATM/s that deliver certificates redeemable in gold, and paypal like accounts denominated in grams of gold., adn also redeemable.
see goldmoney.com
However, given the modern political environment, and the failure of the central bank fractional reserve frud ridden gold standard, a signifancant improvement that may be doable is to seperate the banks into pure deposit banks and investment banks. the utility banks would carry FDOC insurance, but mot be allowed ot lend at all. they would exist on fees. The inestment banks would be stripped of FDIC and Federal Reserve protection and would be subject to strict fraud laws if they failed to meet obligations to investors.
Creating excess paper credit cannot bring about the creation of real value. Real capital has to be saved by someone producing more than they consume.
Further regulation of a fundamentally corrupt fractional reserve system is unlikely to help at this point. The big banks have such concentrated power that any regulations will likely be drawn to the advantage of the big playsers. In addition, allocation of capital by bureaucratic decree does not have a good track history. Reintroducing private free market banking wher greed is controlled by depositors with skin in the game and for the time being, vigourous prosecution of traditional definitions of fraud, is likely to work out to the great benefit of society. The problem is that free market is a four letter word You FrMa, and Gold is also a four letter word…