In a world where the Federal Reserve's decisions are as predictable as a squirrel on caffeine, the Custodia v. Federal Reserve Board of Governors case has provided a delightful spectacle of bureaucratic gymnastics. Our thorough analysis reveals that the Fed's worries stem from an unconscious belief that Caitlin Long might become their next boss. And who could blame them? The thought of a competent leader at the helm is enough to send any self-respecting bureaucrat into a tizzy.
Jerome Powell, the Federal Reserve Chairman, known for his impeccable ability to say a lot without saying anything at all, has been at the forefront of this circus. The Federal Reserve, in a move that can only be described as "classic Fed," delayed and then denied Custodia Bank's application for a formal connection to the banking system. The reasons? Well, they're as clear as mud.
One of the Fed's primary concerns was Custodia's lack of FDIC insurance. Now, for those unfamiliar with the intricacies of banking, FDIC insurance is a bit like a safety net for banks. But here's the kicker: Custodia doesn't need such insurance. Moreover, many other banks operate without FDIC insurance, making one wonder if the Fed's real concern is that they didn't get an invite to Custodia's last Christmas party.
Another concern, and this one is a doozy, is that Custodia will introduce systemic risk. Yes, you read that right. The Federal Reserve is worried that a bank with a safer structure than traditional banking might be too attractive to customers. It's akin to worrying that a restaurant might be too clean or a car too fuel-efficient. One can only imagine the sleepless nights at the Fed, haunted by the nightmare of a banking system where customers actually get what they want.
Now, let's talk about Caitlin Long, the CEO of Custodia Bank, and the woman who has inadvertently become the bane of the Federal Reserve's existence. After 22 years on Wall Street, Long decided to venture into the wild west of Bitcoin and blockchain. She founded Custodia Bank with a simple proposal: to be a fully reserved bank that keeps all cash at the Fed, while also providing qualified custodial services for Bitcoin and other digital assets. A pure service provider. But alas, the Federal Reserve, in its infinite wisdom, decided that this was too radical an idea.
In an interview, Long likened her bank's model to a valet parking system. You park your car, keep the keys, and if the garage goes bankrupt, you can still drive away. Simple, right? But apparently, the Federal Reserve prefers the model where you give your car to the garage, they sell it, and then give you a bicycle in return.
Long's reaction to the Fed's denial was one of surprise. "We were blindsided," she said. And who wouldn't be? It's not every day that a bank gets rejected for being too efficient and customer-centric.
In the end, the Custodia v. Federal Reserve case is a testament to the age-old adage: "If it ain't broke, don't fix it." And if it is broke? Well, just deny, delay, and deflect. After all, that's the Federal Reserve way.