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agree with all except your last sentence . whats the issue ?

Concentration of deposits leads to less competition in the banking sector and more concentrated risk in global systemically important banks, i.e. the ones that are too big to fail. But maybe that's no the end of the world, and maybe the deposit limit isn't the best way to create competition.

And if banks aren't allowed to make risky investments with deposits (good policy, IMO), then I believe we want people and businesses using banks for their most liquid needs, but otherwise, putting their money to work through investment.

banks don not lend deposits per say. this is an anachronism. banks make loans and loans create deposits. there is not a dependency on deposit funding loans. banks create loans on demand so long as they meet capital requirements. deposits are not capital. they are liabilities. (there as a thread last week about all this which you can read that is probably helpfull)

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