I am not a lawyer. What I see is a business relationship in which I am buying a service. What the lawyers call it when they draw up the papers is interesting, but it does not affect either the value I assign to what I am buying, or the price which I might negotiate to buy it. To me what's going on is that I have idle money, and I would rather earn a return on it than stuff it under the mattress. In the absence of banks, I would have to take it upon myself to find someone who had a productive use for the funds, such that he or she would be willing to pay me interest to get their hands on my money. Then I would have to read their business plan and examine their financials to see if I believed they had a prayer of ever paying me back if I loan them my money. I might have to do this three or four times before I find a suitable borrower whom I trust. I do not have time for this nonsense. I would like to hire someone else to do it.
Along comes Mr. Bank, whose business is finding borrowers just like the ones I'm looking for. He not only finds them, he checks their plans and their financials, to the extent that he himself will absorb the loss if they abscond with my money.
If I found those people myself, I could probably get 6% out of them, but I would have to do all the work, plus hire an attorney to paper the deal. Or, Mr. Bank will do the work, and the lawyering, and indemnify me against loss caused by a borrower's default, for 3%. I see this as a good deal. I hire Mr. Bank for 3%. What he does after that, I don't even want to know about.
Lawyers will view what happened there as two separate, unrelated transactions. This is why we keep lawyers in cages, in the basement. They don't understand business. They always get bogged down in the details, except that nothing in this paragraph shall be construed to imply that any particular detail, nit, smidgen, crossed t, dotted i, nor any tiny thing, in whole or in part, singly or in combination, will have any purpose whatsoever beyond increasing those fees payable under Section II, Paragraph 3, to said attorneys, in lawful U.S. money, at the address specified below.
With all due respect, it has nothing to do with being a lawyer...You are just not bothering to make important distinctions that are central to the discussion. Specifically, the legal relationship between you and an institution is affected by whether that relatiionship is defined by:
1. brokerage
2. dealership
3. secured creditor
4. unsecured creditor
5. share owner in fund
6. bona fide depositor (i.e., bailment relationship)
Among other things, by not bothering to make the distinction, you end up believing your alternatives are the current institutional structure or no institutional structure, thereby missing all of the shades in between.
The world I favor is one that includes all of the above, all competing on an equal footing and with none of them allowed to lend out demand deposits, for which, by definition, I would insist upon a bailment relationship. That does not preclude CDs, money market mutual funds, and a host of other relationships designed to funnel money from bona fide savers to bona fide investors. The difference between the system I envision and the one we have now is that the one I envision would not be inherently unstable and all parties will be required to bear their own losses (or if they prefer, insure with a suitably deep pocketed insurer.