The Economic Fractalist deserves a full post of his comments regarding a national bank. I would add one cost saving device: Use local Social Security offices as branch offices. With a little retro-fitting and expansion, they would do nicely, giving us a real sense of security. And…they are everywhere. Furthermore, being local they would understand local needs and risks.
A Modest Proposal
The People’s Bank of The United States
(And Debt Negation For The Little People)
There is ardent attempt to recreate the old model of Western consumer spending and reliving the dream.
Instead of creating ‘new bad banks’ to service toxic assets; instead of bailing out or carving up bad old banks that are currently insolvent on a composite basis; instead of doing the worse of all and assuming all the low brow idiots’ liabilities and nationalizing bad banks, perhaps… perhaps… the creation of a ‘new national good bank’ represents a better pathway.
The Federal Reserve has often demonstrated that banking is only a manipulation of electronic ones and zeros (backed by political and social stability and weapons and reasonably reliable delivery systems).
The creation of a new United States ‘People’s Bank’ is proposed. This American Taxpayer’s Bank can borrow directly from the US Treasury at extremely low rates bypassing the Federal Reserve. Who wouldn’t agree that after the past seven and a half decades a little competition for the old Fed may be in order. Better still, no borrowing from the Treasury is necessary – just use the couple of trillion dollars of virtual money in the Social Security Trust Fund that is backed by the full faith and best intentions of present and future taxing federal politicians. Leveraging those virtual dollars in an exponential fractional manner could double or qradruple dectuple the amount available for lending. Think of it: 4 or 80 trillion to lend at low enough rates rates that would make the Japanese government unnerved. Perhaps a concept of ‘sufficiently negative’ rates could be engineered to ‘significantly enhance’ borrowing. Lending could target new mortgage applications and new entrepreneurial industries that are defined as beneficial to the country. Even new American furniture factories, clothing textile plants, new automobile companies, private energy and energy grid companies, clean water companies, nuclear power plants, et. et. et. al. – could receive expedited loans.
A plethora of newly unemployed lower level banking managers and loan officers from collapsing financial institutions could be hired at nominal rates to manage the transactions and assure reasonable credit worthiness. Likely, toxic banks and financials load stoned with their untenable balance sheets and blighted past performances, would fortunately not score out as a good enough credit risk to borrow from the new People’s Bank.
Ultimately the US Social Security Trust fund would be backed both by hard collateral assets and by its doubly benefited taxpayers both receiving loans and paying interest on those new mortgage, new business and new industry creation loans. This would of course be in addition to the high interest rates that the Treasury is already currently paying for the use of this virtual money; double interest earnings for the US Taxpayer – that’s a real deal by any standards.
And if the private banks and financial industries go under because of their inescapable toxic debt and inability to see the inevitable qualitative results of bad risk taking, and if banking and financial stock owners lose all their equity valuation, and if the well bonused CEO’s ultimately lose their jobs and their wealth…and by popular demand.. go to jail…. ces’t la vie.
Mortgage debtors and squatters not yet evicted from their homes should be entitled to win the mini lotto by outlasting the survival of toxic banks … and all outstanding debt on mortgages ‘owned’ by insolvent banks .. also by popular demand… canceled out. After all if the lending banks and financial institutions went under, they didn’t really have the money as a real asset in their locked-box vaults to lend in the first place – an illegal banking practice if there ever was one.
This debt negation plan would overnight eliminate a huge chunk of outstanding toxic debt where valuations of assets are much lower than the debt owed by home owners. These entrapped new serfs and indentured servants of the real estate and banking industry now owing much than the value of their homes will ever be worth in their near life times, would be unencumbered and unbound from their unreasonable, illegal. and unethical contracts.
This freedom from the banking yoke would quickly readjust the asset valuation-debt equilibrium and perhaps prevent social and political instability. Houses were really never close to being worth the goosed-up prices that the bad banks and the mindless real estate hawkers leveraged and perpetrated on American citizens relative to the ongoing mortgage holders’ wages.
Debt negation would immediately help to increase asset valuations, reverse the deflationary spiral, get people spending again, and jump start the economy faster than any of the available logically inconsistent plans. Even inflation would make a come back making equity speculators, gold hoarders, oil barons, and Prius owners happy as clams.
The People’s Bank of The United States – it has a ring to it.
In this milieu of hair brained and undo able ideas; The People Bank deserves consideration; don’t count it out.
And… the little people .. may … for once in their lives … have a chance to best the deals the bankers have been getting since 1913.