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Published Mar 24, 2023

Ep23 “When Banking Fails” with Amit Seru

Explore the fragility of banking systems as top finance experts dissect the failures exposed by the Silicon Valley Bank collapse, discussing alternatives, government roles, and the overlooked risks of rising interest rates in pursuit of more resilient financial systems.
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Episode Highlights

  • Banking Models

    Exploring alternatives to traditional banking, and discuss the concept of allowing depositors to withdraw funds based on current value rather than at par. This model, akin to mutual funds, could mitigate the risk of bank runs by aligning withdrawal values with actual investment performance 1. They question the rationale behind maintaining the current banking system, suggesting that it may be outdated and proposing a shift towards equity financing for investments 2.

    Why do we still have banks?

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    The conversation highlights the potential for more stable financial systems by rethinking how banks operate and are financed.

       

    Government's Role

    emphasizes the importance of balancing regulation with market-driven risk management in banking. He argues that while regulators play a role, banks should internalize risks to ensure stability 3. and critique the current government subsidy system, which they believe distorts competition and benefits bankers disproportionately 4.

    Current bankers live off those government subsidies.

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    They advocate for a shift away from deposit-based financing to reduce taxpayer burdens and enhance economic stability.

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