Banks give free checking now by investing the money that customers are not using. Banking reform idea:
Set up a special system of “checking banks” to issue all checking accounts. Checking banks hold the money until the customer writes a check or uses a debit card. Checking banks are not allowed to invest that money because they might lose that money. Instead they charge a fee for services — a swipe fee for debit cards, an ATM fee, a check fee for each check written and processed, a paper fee for issuing statements or online fee for access to online system if desired.
FDIC insurance applies only to checking banks. Risk is low because they will not gambling with depositor’s money. There will be dozens of such banks competing on the basis of low fees. If any bank fails only a few depositors will be affected and cleanup costs will be low. Most banks will be online because that is the cheapest. Federal law may require states to charter such banks and that state may require all employees to live in that state.
All checking bank managers must be honorably discharged from the military, never worked for any other kind of bank or financial institution, and post online their current GMAT test scores, college transcripts, credit reports, and other information. They should have a CPA, CFA, FRM or other professional certification. They should not consult or be on the board of any other company to avoid all conflicts of interest.
Then make other silos for investment banks, mortgage banks, commercial banks, consumer banks, land banks, common stock banks, bond banks, commodity banks, … Personnel would be specially trained for their industry. Investors would keep their money in their checking account bank for most purposes but when making an investment they would locate an appropriate bank and write a check to that bank. These investments would not be insured by the government. Consumers would have to pass an exam to invest in any of these risky banks to certify that they understand the risk of that investment. Consumers can diversify by putting part of their money in the different types of banks out there.
I get angry at JP Morgan Chase, Wells Fargo, and such banks trying to get me to invest in risky investments when all I want from them is a checking account or CD. Then later they want bailouts for them and their cronies. If they are so smart then why do they need bailouts? Why should I invest with them? Why don’t they work in an area in which they are competent? Bank of America and Chase both have very good online systems.