The deposit-taking function of FDIC-insured banks failed gracefully. So did broker-dealers of centrally cleared securities, i.e. those processed at clearinghouses. The parts that junked up were negotiated between private parties.
Rational actors are hypothetical. There is a cost to forcing every transaction to bear the full burden of due diligence. Pooling these costs under a trusted agent makes sense. Note that stock exchanges and clearinghouses, which have strict eligibility requirements, emerged from the free markets.
Rational actors are hypothetical. There is a cost to forcing every transaction to bear the full burden of due diligence. Pooling these costs under a trusted agent makes sense. Note that stock exchanges and clearinghouses, which have strict eligibility requirements, emerged from the free markets.