This is the Kator Daily Podcast for Friday, August 12, 2011. I'm Caleb Brown.

One bank has decided to go out of business, or rather it's decided the benefits of federal deposit

insurance are no longer worth the new regulatory burdens.

Mark Calabria, Director of Financial Regulation Studies of the Cato Institute says it's for good reason.

Recently a little bank, oddly enough, named Main Street in Little Town, Texas, Kingwood,

has decided it's going to give up the benefits of federal deposit insurance and essentially go on its own, unbecome a bank, but still do the basic function of banking by taking borrowing money, lending money,

making loans, and helping to create business.

Now, it's very interesting that this bank has decided that it's going to give up what are some very

substantial benefits that come along with having federal deposit insurance but

also with their substantial benefits become an increasingly large array of

regulation and so what this bank has decided is that the cost of

being a bank, the regulatory costs that are, have started to outweigh the

benefits you get from the protections.

And it has decided, I can do this differently,

I can do this better, and I can essentially go back

and do what has historically been a very basic banking

model, which is know your customer. a very heavy

very basic banking model which is know your customer

main street bank had a very heavy concentration in small business

uh... which small business lending has not been

securitized and standardized in the same way as, say, mortgages or credit cards.

It's still a very old school, you sit across the table from somebody, you get a sense of

...