Monetary policy safeguards payments system, deposit insurance key for efficiency.
The payments system has evolved to be more efficient by using claims on institutions instead of physical money. Banks play a crucial role in providing lending and payments services due to their ability to evaluate credit and manage loans effectively. Monetary policy is essential for protecting the payments system. Fed discount window lending is favored over private lenders. Deposit insurance serves as a substitute for unrestricted branching. Narrow banking is seen as a costly alternative.