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There is a better way to restore trust in our financial system and get our economy rolling: Limited Purpose Banking. It's a simple and essentially costless change in our financial system that limits banks to their legitimate purpose: connecting, and intermediating between, borrowers and lenders and savers and investors. Under Limited Purpose Banking, all financial corporations engaged in financial intermediation, including all banks and insurance companies, would function exclusively as middlemen who sell safe as well as risky collections of securities (mutual funds) to the public. They would never, themselves, own financial assets. Thus, they would never be in a position to fail because of ill-advised financial bets. No-risk banking? Exactly. It means making banks--meaning all financial corporations--be the disinterested intermediaries they pretend to be.

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