The Federal Reserve should take over checking services from private banks
- From: smith <spam@xxxxxxxx>
- Date: Sat, 05 May 2007 21:26:57 GMT
The Fed should offer checking and debit card services which would solve two of the biggest financial problems the US (and the world for that matter) faces and that is fractional banking and credit card fees.
Presently whenever you purchase something online or use your debit card at a store, the credit card company takes a bite (a tax of sorts) out of that purchase. This can be 1-3% for bigger purchases and 3-6% for larger purchases. If you add up all the purchases done by credit/debit cards this is a huge amount of money! Merchants can even lose money on small denominated items because the transaction fee is higher then the cost of the item. Sure you're thinking...why can't the merchant just raise his fees to offset these costs if the consumer uses a credit card? They can't legally, because in order to set up merchant accounts with the credit card companies they have to sign 'merchant agreements' that ensure that items won't be charged differently based on the payment method. So even though offering discounts for cash payments saves both the consumer and the seller, it is illegal if the store offers credit card payment as an option. Pretty much all stores have to pay these fees, so they can safely pass almost the entire cost on to the consumer which is a huge inflationary rippoff.
All of this is unneeded. When you write a check or swipe a credit what you really doing is just moving information around on the Fed's balance statement. Person A has a deposit at Bank1 for 10K dollars. He writes a check to person B who Banks with Bank2 for 10K. What happens is that Bank1 transfers 10K from their Federal Reserve account to Bank2's reserve account at the Fed. But there is no need for privates banks to do this! This only happens because bankers helped write the rules that setup the Fed and other central banks that ensures that ONLY BANKS can have hold deposits at the central bank which is grossly unfair. This monopoly law allows bank to fleece the public by being the unneeded middlemen between the buyers and sellers which is a huge drain on the economy.
We've seen this before where congress in the US gave monopoly rights to tax preparing services like H&R Block to offer Internet tax filing online for a fee, even though it online filing saves the government a ton of money and they should offer it free to the public. It's the same deal, where stupid ignorant politicians grant illegitimate monopolies to private companies at the expense of the public.
There is no reason why the Fed can't offer the public the right to hold accounts like private banks do. To get started, the Fed could start out like many online banks we have today. Checks could be mailed into a branch office. Wire services could be offered (for free). Checks could be mailed to people who want to signup so people could write checks just like they do with a bank. The Fed could also issue a 'Direct Access Federal Reserve Debit Card' which would allow users to to charge their accounts directly from the Fed with just a swipe of their card but without all those awful merchant account fees. As time went on, the Fed could expand their account services to include the standards like direct deposit and bill paying. Cash could be obtained by the current time machines we have now, and banks could be forced to accept cash deposits on behalf of the Fed in the short term, until the Fed could expand enough branch offices to facilitate cash services on their own.
The other major problem this would fix would be fractional banking. Presently when you put your money into a bank, the banks goes wild speculating your money on investments while the present Fed has this fake oversight mission of where they make sure banks don't speculate too much (don't want the banks to create toooo much inflation when they fabricate all their phony investment deposits), but speculate enough not to create a liquidity crisis (AKA bankrun because banks are greedy and issue more deposits then they can meet in reserves). This messed up system only can happen because bankers are the ones that influence and control the central banks (politicians pretend to control central banks but they don't). Now banks would by causing economic crashes left and right if their parasitic behavior wasn't being constantly bailed out by Federal Reserve subsidies which are shouldered by the public by the amount of inflation we endure.
This inflation, the threat of bank runs, and Federal Reserve subsidies can all be eliminated if the Fed offered direct checking.
Unfortunitly this plan will never happen because the public and their demagogue politicians they love don't have a clue how our monetary system works, so they are rely on bankers to regulate bankers which means any hope of practical reform is probably hopeless.
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