> Yes retail banking is essential, but investment banking isn't - it provides little of value to society
Personally, when I can't see a thing's purpose, I go and find out. I don't assume that my not knowing its purpose means it has none.
One example of something investment banking does is crop futures trading, which is a large part of why we don't have starvation in modern societies and also why farmers are now able to live perfectly well when there's a bad harvest. Farmers used to starve to death because of a bit of bad weather, so that's pretty valuable.
Most people who want to stop working at some point also consider pensions to be quite valuable.
> Rather than spend billions of taxpayer's money bailing out the old banks, perhaps the government should have started a national non-profit retail bank, reducing the motive for risk taking and the likelihood of future banking crisis?
You mean like they had in Spain? Yeah, that worked.
When proposing a solution, look around to see if it's been tried before and, if so, whether it worked.
What the British Government did as part of the bailout was insist that banks have to ringfence their retail and investment arms from now on, precisely so that in future it will be possible to bail out retail banks (and thus preserve the money supply, which is what was necessary) while letting investment banking fail and fall. That condition is being enforced: the ringfencing really is happening.
Incidentally, you want to reduce the motive for risk-taking. I understand that there's this popular image of bankers as roulette players, but that's not actually the nature of risk in banking. If you want to start a small business, you need a loan. Giving you that loan is a risk. If you want to expand your small business and hire more staff, you need a bank to take a risk on you. If you want to buy a house to put your family in, you need a bank to take a risk on you. Even tiny investments -- an unemployed person buying a new suit they can't afford for a job interview; a poor immigrant using a friend's credit card to buy a professional-grade sewing machine in order to start work as a seamstress -- require someone to take a risk with some money. It's not always a bank taking that risk, but it usually is. If banks stop taking risks, we're all fucked.
> When all banking is done electronically, the overheads will be minimal, and banking services could effectively be free for all.
I assume you want a completely unregulated bank, then?
Banking services have indeed got much cheaper than they used to be, thanks largely to the electronification of money. But there is a little bit more to banking than just moving money around. Checking people's ability to pay before giving them a mortgage, for instance: takes time and effort and work to do that. And my understanding of the post-2008 environment is that banks are (rightly) expected to do more diligent checking now, not less.
Avoiding giving huge bank loans to ISIS for them to spend on grenades: again, takes lots of work to check backgrounds thoroughly, because terrorist groups do devious things like using false names and setting up legitimate fronts.
I'm guessing you dislike tax evasion, too. So do you want banks to look out for it or not?
Banking costs money because it involves work. No, really. You want it to be cheaper, remove the work requirements.