As noted here previously, one of the true causes of systemic risk in our financial system is the FDIC. A bank account is, simply, an unsecured loan to the bank. Because accounts are "insured" by the FDIC, account holders are not as concerned about banks engaging in risky behavior as unsecured lenders would otherwise be. In theory, the FDIC should be so concerned and could set appropriate terms. In practice, of course, well, here we are.
On the other hand, without FDIC insurance we face an increase risk of bank runs, which can cause liquidity crises, and so threaten the economy. Even without FDIC insurance people seeking return on their savings would still put their money in banks, it would simply be less "sticky" and therefore more systemic-ly risky.
Finally, our Government is a massive borrower, largely from foreign sources. At this point, realistically, we carry debt that can only be rolled, not -- ever -- be payed back.
Given all this, the sensible thing -- to me -- would seem to be the Government acting, itself, as a retail bank. Instead of holding accounts that are, in effect, loans to Chase, subsidized by the government, individuals should be able to open accounts that are, in effect, loans to the Government. Private banks could play a customer-facing/administrative role as a DMV-style customer interface would kill the project. Better, I think, to finance as much of our debt in this manner as possible, than borrowing more from abroad. Once this system is set up, FDIC insurance could be wound down in a reasonable manner (eg: lowering the amount covered by a certain percentage annually).
The main public-interest negative I can see in this is that it in its structure acknowledges the permanence of our national debt. But that is simply facing reality.
Facing a different sort of reality: Too many vested interests make too much money off of FDIC insured accounts for this sort of reform to ever have a chance.
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