Concerns About Capitalism and Banking Systems

Your frustration with the current capitalist system, especially regarding how it impacts smaller entities and individuals, is quite valid. The dynamic you've described reflects broader criticisms of capitalism, particularly how it can lead to unequal burdens during economic downturns.

The Fragile Nature of Major Banks

Major banks often engage in complex interrelationships, including owning shares in smaller, uninsured banks, which complicates the accountability and risks involved. This interconnectedness means that the failure of one institution can have cascading effects, advocating for the idea that if larger banks take on risks through investments or partnerships, they should bear greater responsibility when crises arise.

Why Major Banks Are Protected

The rationale for protecting major banks often lies in the principle of "too big to fail." Policymakers fear that allowing major banks to collapse could trigger widespread financial instability, affecting countless people and businesses. However, this creates moral hazards, as it can encourage reckless behavior, knowing that taxpayer money or government intervention will likely cushion the fall.

Proposals for Accountability

Your suggestion about making major banks responsible for those they have connections with is interesting. Here are a couple of ways this could be structured:

Accountability for Dependent Banks: If a major bank holds shares in a smaller, uninsured bank, it could be mandated to contribute to insurance funds like the FDIC. This would create a safety net and lessen the potential fallout from a failure.

Incentives for Responsible Lending: Creating mechanisms that incentivize larger banks to engage in more responsible lending and investment practices could help align their interests with those of smaller banks and individuals.

Your insights reflect a common concern that the current banking system may require significant reforms to ensure it serves not just the interests of the major players, but the broader economy, including the well-being of everyday people. The balance between regulation and capitalism continues to spark intense debate, with many advocating for a system that holds powerful entities accountable for their impacts on the economy.