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How I'd reform the banking system How I'd reform the banking system
by Joseph Gatt
2020-05-12 08:00:11
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A few things I would change about the banking system. Or how I would conceive the banking system.

Student loans

I remember my first year as a college student. I was surrounded by 600 classmates whose names I didn't know. I had to race my way around buildings I did not know. A lot of the lectures were confusing. And miscommunication meant that I was never sure what the exam dates were.

By the second year some professors became friends, exam dates tended to be clear, I was comfortable with the lecture format, and knew the names of about 150 students (a lot of the rest of the students dropped out).

banin01_400By the third year I have my comfortable rhythm. I worked odd jobs, tutoring, selling books, selling sandwiches, editing videos, interviewing former French Prime Minister Laurent Fabius (for the anecdote I was thrown into that interview with zero preparation!). Anyway.

Point is, if I were in charge. Loans cover 100% of the students' first year. Focus on your studies. Get to know your classmates' and professors names. Be familiar with your surroundings. Wake up on time for those tests. Don't try to cook French fries by putting frozen fries in the microwave (which is one of many stupid things I tried to do). You get the idea.

Second year, your loan is going to cover 50% of your tuition. If tuition is 20,000 a year, you get loaned 10,000. Get a job in the summer, work part-time in your second semester, or ask people for help.

Third year, your loan is going to cover 25%. By now you probably know a supermarket that would hire you, you can even negotiate extra hours for more pay, or maybe you found a nice bar that pays waiters a good 15 dollars an hour, plus tips.

Fourth year, your loan covers nothing. You pay for your own tuition.

This model would be beneficial for both banks and students. Students have to work their way through college, and learn about the value of money as they grow up.

Consumer loans (also known as “credit cards”)

One rule I would put in place is that if your credit card debt passes 30% of your annual income, you lose the card. Most people owe 50 to 100% of their annual income, which is debilitating. Good for banks, good for customers.

Mortgages

I'd offer this plan. 50% down and 50% in monthly payments. And preferential payments for those who put 70% down and 30% monthly payments.

This will encourage couples, individuals and single parents to try to rent a place before they actually buy a place. They'll start off with renting a small place, then, when they've put enough cash saved up, they'll use that for their down payment.

Medical bills

Medical expenses can be a gamble on life if there are serious illnesses or accidents involved. Do I opt for the expensive treatment, or for the cheap treatment? Do I try everything to save my life, or do I take a gamble on life but save the rest of my family money?

If I were a bank, of course I'd advise my customers to get health insurance. But I'd also advise my customers, and encourage them, to save 10-20-30% of their income, by offering various savings services, a medical piggy bank of sorts that they can break later on if they have a medical emergency. The older people get, the more likely they are to get sick, so I'd try to instill that habit among kids from a very young age.

Investment loans

Finally, those investment loans. People want to start a business or expand a business.

What I would do is encourage self-financing or obtaining grants as much as possible. If your investment project is that great, people should be willing to invest in it! Or you should be willing to invest in it!

So I'd only loan for portions of the investment. If you want to buy an ice-cream truck, you pay for half of it, or 70% of it, and I'll loan you 30% of it. That will teach you something about responsibility!

Food for thought!


    
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