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U.S. Government take away the FED and FDIC's power to regulate banks and move to a new regulator?

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Voting Style: Open Point System: 7 Point
Started: 4/23/2012 Category: Economics
Updated: 4 years ago Status: Post Voting Period
Viewed: 1,342 times Debate No: 23099
Debate Rounds (5)
Comments (2)
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Should the U.S. Government take away the Federal Reserve and FDIC's power to regulate banks and move it to a new federal bank regulator?

I will be against it of course

Round 1 accept only same as before..........?


Oh man, I'm almost tired of the FED now. Haha
Sure, I'll accept. State your case.
Debate Round No. 1


As always thx for accepting................

Should U.S. Government take away the FED and FDIC's power to regulate banks and move to a new regulator ?

I am going to address each topic individually.........

Federal Deposit Insurance Corporation(FDIC):

Brief history: The great depression caused banks to collapse when this happened the banks lost their customers money it was estimated that a little over $1 billion was lost. To "fix" this(for lack of a better word) president Roosevelt signed the Banking Act of 1933 which created the FDIC. The purpose of the FDIC was to ensure consumers that their money was safe should a collapse happen again. This insurance restored confidence.

The FDIC consists of seven divisions. The Division of Finance, the Division of Information Technology and the Division of Administration provide logistical and administrative support for the corporation. The other four divisions handle the FDIC's major responsibilities:
*Division of Supervision and Consumer Protection - These are the FDIC's police officers, so to speak. This division examines the business practices and investment strategies of insured banks to assess the banks' potential for failure. The division's Compliance Examiners conduct studies to make certain banks are following federal banking regulations. Employees of this division visit individual banks to make their assessments.
*Division of Resolutions and Receiverships - When an insured bank fails, these guys swoop in to save the account holders. If there is a bank willing to take the accounts under its wing, the FDIC draws on its insurance fund to essentially re-create the depositors' accounts (up to the insured amount) in the volunteering bank. If no bank will take the accounts, the FDIC directly pays the depositors up to the insured amount of $100,000. For example, if Sarah had $3,345 in her checking account when the bank failed, the FDIC pays Sarah $3,345 within a matter of days. To replenish the FDIC's insurance fund, the DRR sells the failed bank's loans and assets. Assets might include bank offices, office supplies and even office chairs, desks, and computers.
*Legal Division - Other than handling the corporation's litigation, this division enforces federal banking regulations in banks declared in violation by the Division of Supervision and Consumer Protection.
*Division of Insurance and Research - This division employs statisticians and economists to assess the nation's economic health. These analysts examine business activity, markets and real estate trends to look for warning signs of bank failure.[1]

The FDIC’s guarantee is solid. By law, federal deposit insurance is backed by U.S. government. You can be sure that if the FDIC ran out of money, the government would fund them. It's like the saying if it is not broke then do not fix it.

The Federal Reserve(the FED):

The Fed's original job was to organize, standardize and stabilize the monetary system in the United States. The FED is the central bank of the United States it is the bank for banks and the bank of the U.S. government. The Fed regulates financial institutions, manages the nation's money and influences the economy. By raising and lowering interest rates, creating money and using a few other tricks, the Fed can either stimulate or slow down the economy. This manipulation helps maintain low inflation, high employment rates, and manufacturing output.[2]

Should the U.S. Government take away the Federal Reserve and FDIC's power to regulate banks and move it to a new federal bank regulator?

No. I hear complaints all the time about the FED and FDIC. But no alternatives which is because it is the best system is in the world literally. If we were to abolish our banking system today, what steps would have to be taken to ensure a viable and stable alternative for the banking system (rhetorical)? Our banking system has done an fine job it needs change.



I might agree with half of your argument.

The FDIC is not completely necessecary, but its not unnecessary. There are some problems accociated with it. But there would be problems without it also. One thing I do not agree with is how the FDIC bails out corporations because they are "too big to fail" I do not believe in this, however, to an extent, it is necessary.
I would have to say that the FDIC is one of the few government agencies that would cause problems if abolished. It would cause even more problems if it were abolished overnight.

For the FED however...
My opponent says he has never heard of any alternatives to the FED. This is not our first argument on this subject. In my last argument, I proposed an alternative. An alternative that would prosper compared to the FED.

Abolish the FED...why?
Well for a couple of reasons.

First it is a cartel, which I will not address, for my opponent believes this to be a conspiracy theory, so I will just not even describe it.

2. It has failed to do its job at stabilizing the economy. It, in fact, destabilizes the economy.
The FED has the ability to create money, from absolutely nothing. The Federal Reserve Act is so broad, it has the ability to even use the debt of other countries to create money. It creates new money and delutes the value of the dollar.

Economists generally agree that high rates of inflation and
hyperinflation are caused by an excessive growth of the money supply.[6] -Wikipedia

Inflation is also a tax.
I have explained this to my opponent before, but I will provide a video, which will put my words into simpler terms.

The Federal Reserve has decreased the value of the dollar since 1913. Since 1913 inflation has increased 2217.1%
The value of our dollar has decreased so much that something that costs $20.00 in 1913, would cost $463.42.

My Alternative
Privatize it all.
Abolish the FED and create a non-monopolistic free-market banking system (minarchism). This would work for many reasons. Banks would actually have to compete (which they really don't nowadays because the FED funds them) which would create fair interest rates.
We should also go back to a gold-standard economy. This would limit inflation to little or none. Because gold is not as abundant as paper, our currency would stay valuable and inflation would not occur. Now, of course this could not happen overnight, but if we were able to somehow gradually move to a more free-market economy (because we don't have a free marker) than none of these problems would occur.

Citations (which I really did not use)

Debate Round No. 2


My OPP is correct he did show me an alternative to the FED. I have not heard a good alternative to the FED.


We agree on the FDIC it would cause even more problems if it were abolished.


My argument is simple

The U.S. was unstable financially before the FED. Before the FED cash crunches(cash crunch is when an organization does not have enough money to operate successfully or in the normal way)and bank failures made the U.S. economy a riskier place for international and domestic investors. The lack of dependable credit stunted growth. [1]

Criticis of the FED. Can either have a FED that feeds our economy with ideal interest rates leading to low unemployment or you can have a Fed that offers little help and ultimately force the economy to learn to help itself. The ideal Fed would be willing to do both. Although there have been calls for the elimination of the FED as the U.S. economy matures, it is very likely that the FED will continue to guide the economy for a long time.

The united states has grown economically and has become the richest nation in the world since the FED was created.[2]
This why the FED works it is not broke so we do not need to fix it.[3]



My opponent does not give any reasons why a privatized banking system wouldn't work.
My argument of a privatized banking system still stands.

My opponent says that before the FED was created, our economy was unstable, and our growth was stunted. Well, this doesn't provide any reasoning why the FED should be kept.
Also some of the information my opponent provided was either biased or not the full story. Let me remind my opponent that before the FED was created, the Industrial Revolution occured, where all we did was grow. And even before the Industrial Revolution, we were stable.

GDP per capita was broadly stable before the Industrial Revolution and the emergence of the modern capitalist economy. [13] The Industrial Revolution began an era of per-capita economic growth in capitalist economies. -Wikipedia

I think what my opponent was reffering to though was the sudden panics that occured because of bank runs. One reason for the systematic bank runs that occured was because the banks loaned more money than they should have, and their profit margins fall. A bank run is a self fulfilling prophecy. Once there is the risk that the bank might go under, they do go under. But businesses go out of business all the time. That happens in every economy. And the FDIC prevents any money from being lost by the people for this. The FED is not needed, especially when it allows banks to charge interest on nothing by increasing taxes and deluting the currency. And also, the FED was supposed to prevent bank runs. It has not done so.

Much of the Great Depression's economic damage was caused directly by bank runs. -Wikipedia.

The Great Depression occured after 1913. The FED did not prevent anything. These panics are natural in every government.

My argument.
The FED inflates the currency. It destabilizes the economy because of this. If you're currency is not worth anything, than it doesnt matter what bank you store it in. In a privatized banking system, interest rates would be fair due to competition. Also, people would have more freedom to choose what bank they want to support, instead of today's banking system where all banks are basically the same, and banking competition has been eliminated. Being free is always better than being unfree. The FED is broken. It has fails to stabalize the economy, and instead destabilizes it.

Debate Round No. 3


IveGotUrOuts forfeited this round.


Are you just going to let the time run out? Okay.

My opponent has failed to support any claims about why the FED should stay in place. For this reason, I urge a pro vote.
Debate Round No. 4


IveGotUrOuts forfeited this round.


Yeah, im thinking i won
Debate Round No. 5
2 comments have been posted on this debate. Showing 1 through 2 records.
Posted by TheOrator 4 years ago
It just sucks I can't vote for this, pro totally deserved to win
Posted by AlextheYounga 4 years ago
I again used my phone for that last argument. Sorry for the typos
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