A Radical Way of Thinking About Money
About this episode
Morgan Ricks, a law professor and former Treasury official, offers a radical reframing of financial crises: their cause is not bad bets but runs on 'private money' — money-like, short-term claims (uninsured deposits, repo, money market shares) that the government implicitly backstops but doesn't regulate. He traces this from the 1864 National Bank Act through 1933 deposit insurance: the regulatory regime was built to control private money creation — an insight later eroded. Using the SVB collapse as a case study, he explains depositors fled not over bad loans but because rising rates made the bank's fixed assets worth less than its liabilities. Ricks rejects the moral-hazard objection to backstops, arguing panics are prevented by regulating money creation, not by punishing depositors. His proposal, developed with Lev Menand: 'FedAccounts' — public accounts at the Federal Reserve, open to all, eliminating private money and bank runs entirely.