Proposal to Split Commercial Banks into Depositless Lending Entities and Omnibus Funds

house they would have bought. They will not have missed a sure-fire investment. The crash of 2008 showed that houses are risky too. The time to commit to huge and illiquid investments, as houses are, is after ten or fifteen years of business experience. I see no reason why lending banks should not make equity investments too. Loans, convertible loans and equity investments need the same “due diligence”, or research into prospects of success and return. All might serve the same clients. “Lending banks” might simply be investment banks. That’s why splitting of investment banks and commercial (deposit-and-lend) banks may be a step in the wrong direction. The key is splitting off deposits. Macroeconomics in General Splitting up commercial banks into omnibus funds and depositless lending banks could change the nature of macroeconomics. Macro has meant the art of maintaining growth and money value stability at the same time. This has proved mostly a tightrope walk between inflation and recession. Easy money risks the first, and tight money the second. My idea is to disconnect the problems of underemployment and money value instability. If medicine for one has no side effect on the other, each can be treated more freely. I would first dissociate money value from money supply. No supply is too large if money earns competitive returns while we hold it. That was one of the main ideas of the omnibus fund. Milton Friedman thought my early version of this idea was anathema. Franco Modigliani liked it fine, but asked tough questions. I'll try to answer some of them below. My approach to the problems of underemployment and the business cycle begins with phasing out deposit-and-lend banks as | described. | more or less agree with Chapter 8 Banks, Money and Macroeconomics 2/8/16 12 HOUSE_OVERSIGHT_011101