Arnold Kling on bank regulation

Arnold Kling is always very interesting and informative.

But he writes:

We want to provide consumers with bank deposits that are insured. To protect taxpayers, we want to prevent insured banks from taking significant risks. Therefore, banks should be very closely regulated.

Who is that “we”? How does he know what “we” want? What if insuring bank deposits turned out to be expensive and in itself risky (moral hazard)? I do not want to provide consumers with bank deposits that are insured: I want depositors to look after the safety of their own deposits, and in this way control the banks. Taxpayers and the state need not be involved in insuring or regulating banks. Functional and legitimate regulation comes from below, from competitive and evolving contractual arrangements between interested parties, not from far away and detached bureaucrats.

And of course the state should be separated from money production and management.

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