Badly run banks who’ve misallocated capital going under and being taken over by better run more stable banks. . . What’s the problem?
Discussion
Consolidation of the banking system gives the Fed more control.
What can the fed do with more consolidation of the system that it couldn’t do without.
It’s easier to monitor the entire system (including individual accounts) and collude with the entire industry on regulations/policy. In other words it makes it easier for them to implement more regulations (which usually always ends poorly).
Less banks also allows for more predatory lending. Regional/community banks are usually the least predatory, if only the big boys are left they can essentially do what they want with loan terms because you would only have a few other options (who would probably offer similar terms).
Also makes it much easier to launch a CBDC program since that would require partnering with the banks. Fewer banks requires less parties being on board.
All legitimate concerns
Do you think there are other options for the situation that have better trade offs?
First, the fed should move the reserve requirement off 0. Second, they need to stop raising rates (which appears will be the case moving forward).
But if we really wanna address the root problem, the fed should cease to exist and the government should stop spending so much money. The only reason we’re in this situation in the first place is because of government spending.