The collapses of three large US banks (Silicon Valley Bank, Signature Bank, and First Republic Bank) so far this year has certainly caught the attention of  Federal Reserve and the Federal Deposit Insurance Corporation. On June 29, Fed chair  said at a conference (without going into detail) that the failures “suggest a need to strengthen our supervision and regulation of institutions of the size of SVB.”

In reality, “supervision and regulation” — including the FDIC’s guarantee to make depositors whole should a bank fail — have proven themselves part of, not a solution to, the problem. As regulators jigger with the rules (and break those rules, as FDIC did in paying out more than the insured limits to SVB’s depositors),  creative bankers work the angles in what amounts to an outrageously large casino operation.

The problem is something called “fractional reserve banking.”

When you deposit, say, $100 in a bank, the understanding is that you can withdraw the full $100 at any time.

But your bank doesn’t stick the $100 in a vault so that that it can hand it back to you on demand. Under the Fed’s “capital requirement” rules, somewhere between 90% and 93% of that money (depending on the bank’s size) gets loaned out, invested in bonds, etc. so that the bank makes money from your money.

Suppose some of those investments go underwater — borrowers default, bond interest rates fall. Or maybe the investments just aren’t very liquid — they can be turned into ready cash, but not quickly.

Now suppose you show up at the bank to collect your $100, and all the bank’s other customers are there too, queuing up to close out their accounts (maybe all of you heard the bank wasn’t doing well).

There are a thousand of you standing in line, with an average balance of $100, to make a nice even $100,000 being withdrawn. This is called a “bank run.”

But the bank only has $10,000 on hand and can’t readily lay hands on the other $90,000 it owes all of you.

At some point, the bank closes its doors and goes bankrupt (or sells itself to an institution with deeper pockets for a fraction of its assets’ prospective value). The bank has failed.

Sure, the FDIC will give you your $100 back, taking it out of “insurance premiums” paid by all banks (which is to say, by all banks’ customers).

But what if instead of three banks, it’s 300 banks or even 3,000 banks. Things could get very bad very quickly. Widespread panic at least, and maybe even full-on economic collapse.

Instead of “capital requirement” rules and “insurance” schemes to make fractional reserve banking “work,” we need banks that keep 100% of their deposits on hand instead of loaning or investing those deposits, taking their profits in fees for processing checks and debit card transactions.

Six states already provide for the chartering of “100% reserve” banks, but the Fed is resistant to the idea. And no wonder — in this casino operation, they’re ultimately the house, which always wins. The banks are the gamblers … and they’re gambling with your money.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

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“Three of Donald Trump’s rivals for the 2024 GOP presidential nomination,” Jeff Stein reports at the Washington Post, “are pushing for cuts to Social Security benefits that would only affect younger Americans.”

With the first Republican primary debate approaching,  the nomination contest is a two-way race between former president Donald Trump (far ahead) and everyone else (far behind). It’s Big Idea time in that trailing pack, with every candidate casting about for some kind of policy proposal that might help him or her close the distance.

Ron DeSantis, Mike Pence, and Nikki Haley aren’t really doing Big Idea Time stuff here. A Big Idea needs to be unique to a candidate. Three people saying the same thing (keep the checks coming to retirees, promise younger people fewer future benefits) isn’t a Big Idea. It’s the collective moan of runners who are out of breath and limping.

The last Big Idea on Social Security came in 2016 from Chris Christie. It didn’t help him because no one was really listening to anyone but Donald Trump, but at least it seemed actuarially sound from the standpoint of “saving” Social Security. Raise the retirement age by one week per year, he said, so that nobody’s retirement age gets pushed WAY back; and means-test benefits such that people don’t get benefit checks while still earning more than $200,000 per year.

“Keep those checks coming to old people and tell young people they’re gonna get screwed” is not only not a Big Idea, it’s pretty much electoral suicide. Yes, older people vote at higher rates than younger people, but throwing either group under the bus is a great way to get dragged under that bus with and by them.

For the original Big Idea on Social Security, let’s consult the program’s founding father, Franklin Delano Roosevelt.

“It is proposed,” FDR wrote in a 1935 message to Congress, “that the Federal Government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans.”

Social Security should, per FDR,  have served a short-term purpose then disappeared as personal, private sector retirement accounts took its place.

Instead, Congress spent all the money it took in Social Security taxes and then some, financing benefits for retirees with the taxes paid by younger workers, even as the former population grew faster than the latter. We have a name for that practice: “Ponzi Scheme.” Like all Ponzi Schemes, Social Security will, at some point, collapse into bankruptcy.

Nor, whatever you may have been led to believe, are you “owed” benefits. “The noncontractual interest of an employee covered by the Act,” the Supreme Court ruled in Flemming v. Nestor (1960), “cannot be soundly analogized to that of the holder of an annuity, whose right to benefits are based on his contractual premium payments.” In short, there’s no actual government IOU to U.

Any truly Big Idea on Social Security will necessarily involve winding it down and closing it out with the minimum possible damage to its victims.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

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On July 18, the US House of Representatives passed a resolution by the kind of lopsided vote (412 for, 9 against, 1 present) normally reserved for proclamations lauding members’ hometown Little League programs. Unlike most legislation, Concurrent Resolution 57 is short enough to fit comfortably into newspaper op-ed length:

“Resolved by the House of Representatives (the Senate concurring), That it is the sense of Congress that —

“(1) the State of Israel is not a racist or apartheid state;

“(2) Congress rejects all forms of antisemitism and xenophobia; and

“(3) the United States will always be a staunch partner and supporter of Israel.”

The billions Congress wastes annually on xenophobic nonsense like “border security” and “countering China”  belie the resolution’s second point, and the third point is simply bizarre — ask the Lakota or the Cherokee about how trustworthy the US is when it comes to “always” commitments.

But what about that first point, which was what the resolution was really intended to get across after US Representative Pramila Jayapal (D-WA) stepped on a political third rail by contradicting it on July 16 (Jayapal quickly turned tail, apologized, and voted for the resolution)?

Well, there’s a problem with that point as well:

Israel IS a racist (at least if the concept of “race” encompasses ethno-religious groups) and apartheid state.

Israel was expressly founded as a “homeland” for people of a specific ethnic/religious group, and its “basic law” clearly and unambiguously affirms that “Israel is the historic homeland of the Jewish people and they have an exclusive right to national self-determination in it.”

Non-Jews, and especially Palestinian Arabs, are legally treated as second-class citizens, when they’re treated as citizens at all. For example, a “right of return” to Israel is offered to all Jews, no matter where they were born, but not to Palestinian Arabs who may have actually been born right there.

That’s racist, period. Disagree? Substitute “Montana” for “Israel” and “white” for “Jewish.” How does it read now?

As for the “apartheid” allegation, no other term fits a state which has spilled outside its internationally recognized borders (as codified in 1948 by United Nations Resolution 181) and set up a two-tier system based on race/ethnicity in territory it occupies. A system where Arabs are subject to Jewish rule without representation in the Knesset, where Arab property is subject to legalized theft by Jewish “settlers,” where roads and other infrastructure facilities are segregated into “Arab” and “Jews Only” use, and under which a menial class of Arabs are allowed to cross into Israel proper from their designated “homelands” to work, but not to live.

The usual defenses I see of Israel on these matters is that its existence as a “Jewish state,” and its apartheid treatment of Palestinian Arabs, are justified and must therefore not be considered “racist” or “apartheid.”

Presumably American supporters of racial segregation and South African supporters of the original “apartheid” considered their systems justified as well.

Claiming something’s justified doesn’t magically make it something other than what it is.

Neither does lying about it in a congressional resolution.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

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