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Umm...no. What? Where did you get the idea that banks were only supposed to store money? So no one can borrow money to fund new companies and new projects? Ridiculous.
The banks caused crashes through fractional reserve lending -- i.e., lending out money in excess of their reserves. They invested in riskier assets than they should have because the Federal Reserve and the FDIC have their backs. The banks should fail when they don't make prudent investments, but they don't because they have special government privileges to counterfeit money (through fractional reserve lending) and government bailouts for when they fail. Also there are bank charters that are extremely difficult to get that make competition in the banking industry nearly impossible.
Banks aren't lending depositors' funds. They're lending money they don't even have, and the government permits and encourages it.
Of course, there is a way to take the banking function (i.e., lending) away from the banks in your own life, and everyone who can should be practicing it. But too few people know about it at the moment.
HAHAHAHA. You are calling me wrong, and then repeating my argument as yours.
When banks lend depositors' money, they risking lending money in excess of their reserves by definition. It doesn't matter if you allow fractional reserve lending or not "officially". When the economy tanks, if any of the borrowers cannot pay back their loans, the bank is now a fractional reserve lender anyway.
The solution is to stop banks from lending other peoples' deposits and collecting interest on the loans. They should charge a fee for the storage of money and for services, but lending out peoples' deposits should be illegal. If people or banks want to lend their OWN money, that's fine, but they accept that risk, not a depositor or 3rd party who doesn't understand the risk. This would stop the boom/bust cycle in its tracks. It would also eliminate the government/private central bank scheme of inflation theft and force transparency in government spending.
Uh...no. There are two types of bank accounts -- checking and savings. Money in checking accounts is supposed to be available on demand, i.e., cannot be lent out. Money in savings accounts is not supposed to always be available on demand because the bank is using it to invest and earn a return, so that they can pay the higher interest rate that savings accounts are supposed to have.
Obviously the entire system is fucked right now due to the Federal Reserve and government regulation of the banking industry, but banks should only be able to lend what they have an exclusive agreement with their customers to lend out.
As it stands now, the banks lend out money that they do not have -- i.e., not depositors' funds. With a 10% reserve requirement, the banks can lend out the same dollar nine times. That means earning interest on the same dollar nine times. The government suspended the 10% requirement in April of 2020 I believe and I think they still haven't restored it, so there technically is no regulatory limit on how much money the commercial banks can create out of thin air to lend out. There is a practical limit though -- the Fed pays interest on money deposited by the commercial banks with the Fed, and that keeps the commercial banks from even further.
However, your statement that lending depositors' money is the same as lending out money in excess of their reserves is nonsensical. They are either lending out depositors' money or they are creating money out of thin air and lending it. You can't lend out all of the depositors' money and then lend out excess and still call that excess depositors' money. Am I being clear here? I shouldn't have to make this point. You can't have a dollar, lend it out along with a counterfeit dollar, and then say you lent out two of someone else's dollar. You didn't. You lend out one dollar that belonged to someone and one dollar that you created out of thin air.
Fractional reserve banking is what allows this counterfeiting to take place. You do not become a fractional reserve lender by lending out ONLY your depositors' money. If the bank only lent out depositors' money and then the bank failed, then only the depositors with savings accounts will have lost money, and that is a risk that they take when they deposit money in a savings account in the first place.
There are checking, savings, money market accounts, FDIC insured and uninsured accounts, margin accounts and a long list of other types of accounts. That's completely irrelevant. The only relevant type of account would be cash accounts, which do not allow the institution to lend out the deposit, forcing them to use "permissible investments", which can also be risky.
I know how fractional reserve banking works. You are missing the point. Even without fractional reserve lending, if a bank loans out 100% of the money it has on deposit, and enough borrowers fail to repay such that the amount lended out is less than the original amount of deposits, that bank is now a fractional reserve lender, because it does not have the collateral to cover its loans.
Fractional reserve lending is the same dangerous scheme on margin. Banks used to print more gold certificates than gold they had on deposit illegally, fractional reserve lending was the institutionalization of this practice. My point is that even WITHOUT fractional reserve lending, the practice of lending out depositors' money still has the potential to become fractional reserve lending if borrowers do not pay back their loans. The practice of lending out other peoples' money with or without fractional reserve lending is the root cause of the boom/bust cycle and should be outlawed entirely. 99.9% of people do not understand that when they deposit money in a bank, they are actually investing in a loan fund managed by the bank that may or may not be insured.
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