Why can’t govt act as a bank – with low interest loans, etc.?

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If banks create money when loaning money, why can’t the govt do so, but with lower interest rates? E.g. on mortgages, or pay day loans, so citizens don’t end up in debt.

Presumably because it could cause another 2008?

In: Economics

3 Answers

Anonymous 0 Comments

At least from a US perspective, the government very much does do this for mortgage loans—it’s just hidden. Between FHA loans, VA loans, USDA loans, Fannie Mae, Freddie Mac, and Ginnie Mae, the Federal government is very involved in that market.

The government is involved in the student loan market too, although there are private lenders obviously.

Anonymous 0 Comments

It can and does. Government banks are a thing and are not uncommon outside of the US.

Source: My bank is government owned.

Anonymous 0 Comments

Banks don’t create money. The government creates money.

And personal banking isn’t something the government wants to get involved with except on an oversight basis.

And the government has a lot of oversight of those banks, most of which normal people never hear about because the government keeps it running.