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 an automated consolidated bank at the federal level would resolve many of these issues.

   Conservative lending formulas would protect the system from overextending itself with bad loans. Fixed-rate loans would prevent the risks that are associated with variable-rate lending practices.

   More importantly, lending by the automated system will be strictly limited to the amount of capital that it has in reserves. In the past, banks overextended themselves and lent out more money than they actually had on hand. This is a serious issue and why over 450 banks failed during the 2008-2012 financial crisis. Essentially, banks offered loans with fake money that they never had, which is clearly fraud.

   Savings accounts will also be better protected by an automated system since deposits will always remain in cash, and never risked with unsecured debt. This alone would have prevented the Silicon Valley Bank failure of 2023.

   Banks have also committed the unethical act of retaining the profits made from investing their deposits. Depository institutions are not investment firms, nor do they have their customer's consent, to invest such funds without their knowledge. Such betrayal of not only investing deposits without permission, but also retaining the proceeds for themselves, is both immoral and criminal in nature.

   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 the deposit-to-lending ratio. In the past, the prime interest rate was manually adjusted by the Federal Reserve in order to control inflation. Which had nothing to do with the amount of capital in the banking system that can cause problems. In the future, inflation will be controlled by a more direct and effective means than adjusting the bank's interest rate (c.f. Inflationary Tax for more information).

   A consolidated banking system at the federal level 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 remained in cash and lending never overextended also removes the need for the FDIC program since the system is more secure.

   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 banks today since their rates are based on the prime interest rate by the Federal Reserve. 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. An automated bank at the federal level is also non-profit which will provide efficient rates for all.

   Another improvement that the new system provides is that it will allow bankruptcy rules to be changed 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 fines/penalties upon their customers to recover such losses. Also, the automated system's conservative lending formulas will prevent individuals and businesses from overextending themselves in the first place, which will minimize the total number of bankruptcies as well.

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