Automated Banking System

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

   For example, conservative lending formulas that are inconsistent with commercial banks would protect the consolidated system from overextending itself with bad loans. Also, offering only fixed-rate loans would prevent the risks that are associated with variable-rate lending practices that are conducted by many commercial banks today.

   More importantly, an automated consolidated system would limit the availability of its lending to the amount of funds that it has in reserves. Commercial banks have overextended themselves and lent more money than they actually had on hand (essentially, offered loans with fake money). This is a serious issue and why over 450 banks failed during the 2008-2012 financial crisis in America.

   An automated banking system will protect against such fraud as well as protect savings accounts better since deposits will never be risked with unsecured debt. Not risking deposits alone would have prevented the Silicon Valley Bank failure of 2023.

   Also, by investing deposits without consent, commercial banks have committed the unethical act of retaining such proceeds at their customer's expense. In some cases, banks have invested up to 90% of a customer's deposit, while paying the account only 0.01% interest in return. 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. This is illegal to say the least including retaining the profits made on such investments.

   The automated consolidated 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 automated banking system provide better protection regarding its lending and depository procedures, but it also provides 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 to control inflation, which had nothing to do with the amount of capital in the banking system. In the future, inflation will be controlled instead by a more direct means than adjusting the lending rate (c.f. Inflationary Tax).

   The new 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). A consolidated bank that ensures that its reserves always remain in cash, and lending never overextended, also removes the need for the FDIC program since the financial institution is more secure against default.

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

   A consolidated bank will also improve the handling of bankruptcies in that a filing will be more of an extended grace period 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 against such losses. The automated conservative lending formulas will prevent individuals/businesses from overextending themselves in the first place, which will minimize the number of bankruptcies as well.

   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.