Automated Banking System

Solution
 
   Since the nation's monetary system should be as secure and reliable as possible, replacing the multitude of commercial banks that exist today with a single automated consolidated bank at the federal level would resolve many of these issues.

   For example, conservative lending formulas that are not consistent among commercial banks would protect the consolidated system from overextending itself with bad loans. Also, only offering fixed-rate loans would prevent the risks that are associated with variable-rate lending practices that are conducted by many commercial banks.

   More importantly, an automated consolidated system would limit its lending to the actual amount of funds that it has in reserves. In the past, commercial banks have overextended themselves and lent more money than they actually had on hand. So, banks essentially offered loans with fake money that they never had available which is fraud. This is a serious issue and why over 450 banks failed during the 2008-2012 financial crisis in America.

   A consolidated banking system at the national level will also protect savings accounts better since deposits are never risked with unsecured debt. This alone would have prevented the Silicon Valley Bank failure of 2023.

   By investing their customer's deposits without consent, commercial banks have also committed the unethical act of retaining their profits at the customer's expense. In some cases, banks have invested up to 90% of a customer's deposit while paying their account only 0.01% interest in return. This is unethical to say the least. Commercial banks are depository institutions, not investment firms. Nor do they have their customer's consent to invest such funds without their knowledge or permission.

   The consolidated automated banking system will not have any of these issues since its deposits will always remain in cash and never invested elsewhere.

   Not only will the new system provide better protection regarding its lending and depository procedures, but it will also provide a "hands-free" approach towards managing interest rates. Under the new system, interest rates will be automatically adjusted based on its deposit-to-lending ratio. In the past, the prime interest rate was manually adjusted in order to control inflation. Which had nothing to do with the amount of capital in the banking system. In the future, inflation will instead be controlled by a more direct means than adjusting the bank's lending rate (c.f. Inflationary Tax).

   The establishment of a consolidated banking system will also provide greater stability by eliminating the risk of insolvency (e.g., never have to worry that a particular bank will fail since all banks are combined as a single entity). An automated bank that ensures that its reserves always remained in cash and lending never overextended also removes the need for the FDIC program since the financial institution is secure against default.

   Though the disadvantage of having a solitary bank is that it will eliminate the competition for better rates. However, there isn't much of a variation among commercial banks today since their rates are based on the prime interest rate. The minor benefit of having slightly improved rates from competition isn't worth the risk of a bank (or multiple banks) failing due to an economic crisis. A consolidated automated bank at the federal level is also non-profit that will provide efficient rates for all.

   The new system will also improve the handling of personal or business bankruptcies in that a filing will be more of an extended grace period rather than the actual forgiveness of debt. This will allow individuals and businesses time to recover from a financial downturn and not overload the system with unpaid debt obligations. In the past, this caused banks to increase their fines and penalties to recover such losses. The automated system's conservative lending formulas will also prevent individuals/businesses from overextending themselves in the first place, which will minimize the number of bankruptcies in general.

   Overall, a comprehensive and consolidated automated banking system at the national level will result in a more reliable, stable, and efficient monetary system for the country.