How To Create The Safest Bank In America

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Wasenthal.

Tracy Alloway (0:16)

And I'm Tracy Alloway.

Joe Weisenthal (0:18)

Uh, Tracy, you know what I'm really happy about?

Tracy Alloway (0:22)

It could be any number of things, Joe. Your life is great.

Joe Weisenthal (0:27)

That's true. But specifically, I'm happy that the 10th anniversary of the Lehman Brothers crisis happened on a weekend this year because I'm not really that I'm not really that crazy about all the anniversary coverage and I think-

Tracy Alloway (0:42)

Oh no, come on. We have to relive our glory days.

Joe Weisenthal (0:45)

No, I don't really like reliving it and everyone telling their stories over and over again. And I think a lot of the lessons from that time are important and we should still talk about them. But I'm just kind of a little bit over like, oh, this is what happened that day and all the details from them.

Tracy Alloway (1:03)

So are you telling me that we are not going to do a Lehman Brothers Anniversary Podcast?

Joe Weisenthal (1:10)

We are skipping over that one. Plus by the time it would even come out because we're talking about this, it would be too late. So I think there are interesting lessons and all that from the crisis and the collapse of banks and stuff.

But I'm just sort of glad that the 10th anniversary is over.

Tracy Alloway (1:27)

Do you know what people forget about that was actually arguably scarier than Lehman Brothers collapsing at that time? And it happened, I think it was the day after Lehman Brothers or maybe a couple of days after.

Joe Weisenthal (1:39)

Are you going to say the Reserve Fund, the money market fund?

Tracy Alloway (1:43)

Yes, yes, the money market fund that broke the buck.

That was huge. People forget about that.

Joe Weisenthal (1:50)

Right, and that's also the thing that probably has got, while the mainstream remembers Lehman, or Lehman, the sort of in the know people talk about the money market fund that broke the buck.

Anyway, I bring this up because one thing that I do think is very relevant in terms of 10 years after is this general frustration that after the financial system was rebuilt post-crisis, it basically looks the same as it did pre-crisis. Like there might be less risk and bank balance sheets might be healthier, and households aren't so as leveraged to their homes as they were in 2005, 2006 But by and large, we rebuilt the same financial system we had before.

Tracy Alloway (2:39)

Right, I think you could say there's been some tinkering around the edges. Like for instance, you did have money market reform, but certainly when it comes to the banks, a lot of the criticism that you hear nowadays is that not only did we not reform the banks, but the biggest banks have gotten even bigger.

Joe Weisenthal (2:57)

Right, we definitely didn't as a country, as a regulatory system, as a financial system, did not use the crisis of 2008, 2009 to think about whether there are different models that could be fundamentally safer. We essentially just put the sort of humpty dumpty and put it all back together again.

Tracy Alloway (3:19)

Yeah, pretty much.

Joe Weisenthal (3:22)

Anyway, I bring that up because our guest today, I think is someone who is trying to still push forward with a different model of banking. And we're going to be talking to Jamie McAndrews. He was a longtime veteran of the New York Fed and he is the founder and CEO of what he hopes will be a new type of bank that is much safer for retail customers than any currently existing bank.

Tracy Alloway (3:53)

Right, so I'm really excited about this conversation because this idea comes up every once in a while. As you say, it hasn't really gotten much traction just yet, but the notion of narrow banking or full reserve banking or it's sometimes called the Chicago Plan, I think, it's a really interesting one. And this company is probably the one that's gotten furthest along with that idea, although as we're about to discuss, there have also been some roadblocks.

Joe Weisenthal (4:24)

Right, so I don't want to get too into the business model of it before we bring Jamie on because of course he'll describe it best himself. We should note at the outset of this that the bank, which is called the Narrow Bank and listeners will discover why, is not up and running yet. It doesn't actually exist. It's still getting off the ground.

And there's currently a lawsuit happening.