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No, they’ll be replaced by something like The People’s Ledger, as proposed by Comptroller of the Currency nominee, Saule Omarova, in her paper of the same name.

No, they’ll be replaced by something like The People’s Ledger, as proposed by Comptroller of the Currency nominee, Saule Omarova, in her paper of the same name. (She was nominated by President Biden in 2021. Not just a random kook!) Under such a regime all banks will put customer funds at the Fed, which will be the sole entity to allocate credit, with banks as mere customer service frontends. It will use that power to allocate credit to advance nakedly political goals, with much less attention paid to minutae like risk, ability to repay, and other pesky economic concerns the free market would elevate. We’re already forgiving student loans; watch the People’s Ledger forgive mortgages!! And when that bank fails it will just fall back on moneyprinting.

deleted 3y ago
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throwway120385 3y ago
I would actually be fine with this if the mandate is simply to hold deposits and lend deposits with appropriate risk controls. But if the goal is to use that control to accomplish political ends like suppressing wage growth or providing stimulus then I don't think it's a good idea. If the Treasury wants a loan from the Fed to do these things that should be how it's done. Student Loan forgiveness is another thing entirely because those loans are held in public corporations, and if congress wants to use tax money to forgive them they can. You can already get some or all of your loans forgiven in very limited circumstances such as paying them for 20 years without paying them off, or if you teach at a public school for more than 5 years. 20 years of repayment at 300-600 a month is pretty crippling. That's like buying a new car on a loan every 3-5 years. Even income-based repayment has limits on how small your payments can be. Student loans are also statutorily impossible to discharge in bankruptcy, unlike every other form of debt. So I think we need to do something, and it seems like the simplest thing to do is make them the same as other loans. We should allow you to declare bankruptcy and discharge your student loans. This won't fix a lot of the knock-on effects but it will get people out from under the loans.
- vgatherps 3y ago
  > lend deposits with appropriate risk controls Forget stimulus/inflation political goals, can you imagine how horribly this would get weaponised against "people the current administration doesn't like"? I don't have faith that this exceptionally powerful tool would not go unused. Putting that aside, what risk controls are and aren't appropriate? An advantage of having a variety banks is that there's much less of a 'one size fits all' approach to banking services. I also don't have faith that a federally-run bank would be very flexible to anybody outside of the box. I've been in a situation where some bulge-brackets institutions wouldn't provide certain products since I didn't fit exactly in some pre-ordained image of what a customer would look like (and it wasn't even something you'd think a bank would have issue with.....)
- germinalphrase 3y ago
  “ if you teach at a public school for more than 5 years” That’s fairly misleading. It’s only a relatively small sub-set of public school teachers who are eligible. The TCLI Directory can be found here: https://studentaid.gov/tcli/directory-search https://studentaid.gov/tcli/directory-search
- ChadNauseam 3y ago
  > Student loans are also statutorily impossible to discharge in bankruptcy, unlike every other form of debt. If this weren't the case, student loans would just not be offered to anyone not deemed creditworthy. (Or they would only be offered by the government, who would offer them expecting to lose their money.) I think this would probably be a good thing, since easy access to student loans is probably related to why college has gotten so expensive, but the first-order implications of changing this policy are pretty detrimental to poor people.
no_wizard 3y ago
This is not at all how I understood the paper. It was to allocate consumer funds directly with the Fed to prevent bank runs from restricting access to cash on hand for consumers. They just move spigots to different institutions this way. Nominally, this is what the proposal is all about. I didn't see anything about the Federal Reserve or the Government being able to access that money on a 1:10 basis or any other reserve basis. It does however outline how this would stream line government policies and operations, such as Tax Refunds, Social Security Disbursements, or any other qualifying disbursements. Additionally, the idea that is also present in the paper is expanding low risk (demonstrably historically "safe" loans such as SBA Loans, FHA loans, traditional mortgages etc) through the Fed directly, but explicitly bans things like margin loans, PE bridges and other risky behavior. Which, as anyone who has gotten these kinds of loans, knows the government already does this, just with extra steps. The People's Ledger paper (proposal?) simply outlines removing extra steps and barriers for the citizenry to have a better banking baseline, all told. In essence, it makes the Central Bank, more....bank like. With some privileges, being a whole arm of the Government, its less focused on collecting fees and more interested in streamlining banking for the average citizen. It has nothing in the paper about forgiving mortgages (or student loans, for that matter) The paper is here, for anyone interested in this: https://scholarship.law.vanderbilt.edu/cgi/viewcontent.cgi?article=4780&context=vlr https://scholarship.law.vanderbilt.edu/cgi/viewcontent.cgi?a...
- sclarisse 3y ago
  Specific phrases many people will read as political allocation of capital: “Most objections to allowing significant quantitative growth of central bank balance sheets, in fact, reflect the underlying concerns about the qualitative, compositional aspects of such growth. Ultimately, however, these concerns are rarely substantiated by reference to anything more specific than deeply internalized skepticism toward the government as an economic actor. By contrast, this Article views the proposed change in the Fed’s liabilities as an opportunity to augment both (1) its ability to modulate credit-money supply more effectively, and (2) its potential to facilitate the more efficient allocation of that supply to productive enterprise.” “the NIA would transact directly in private financial markets, proactively channeling public and private financial resources into large-scale, transformative public infrastructure projects. Importantly, however, it would reverse the familiar pattern of “public capital, private management” typical of most modern “public-private partnerships” in favor of the “public management, mixed public-and-private capital” model.” Transformative infrastructure projects!! Are there any of those we’ve embarked on recently where the government’s proven more skilled at identifying investment opportunities than the market? Like, say, California high speed rail? What kind of returns is that investment earning? … oh. It’s true they didn’t get all the way to mortgage forgiveness in the paper, but, well, it doesn’t seem much of a stretch, particularly when Housing Is A Human Right (tm). We could call it infrastructure, in the same sense that “elder care is infrastructure” — I seem to recall recent legislative campaigns about that and other social spending.

deleted 3y ago

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throwway120385 3y ago

I would actually be fine with this if the mandate is simply to hold deposits and lend deposits with appropriate risk controls. But if the goal is to use that control to accomplish political ends like suppressing wage growth or providing stimulus then I don't think it's a good idea. If the Treasury wants a loan from the Fed to do these things that should be how it's done. Student Loan forgiveness is another thing entirely because those loans are held in public corporations, and if congress wants to use tax money to forgive them they can. You can already get some or all of your loans forgiven in very limited circumstances such as paying them for 20 years without paying them off, or if you teach at a public school for more than 5 years. 20 years of repayment at 300-600 a month is pretty crippling. That's like buying a new car on a loan every 3-5 years. Even income-based repayment has limits on how small your payments can be. Student loans are also statutorily impossible to discharge in bankruptcy, unlike every other form of debt. So I think we need to do something, and it seems like the simplest thing to do is make them the same as other loans. We should allow you to declare bankruptcy and discharge your student loans. This won't fix a lot of the knock-on effects but it will get people out from under the loans.

vgatherps 3y ago
> lend deposits with appropriate risk controls Forget stimulus/inflation political goals, can you imagine how horribly this would get weaponised against "people the current administration doesn't like"? I don't have faith that this exceptionally powerful tool would not go unused. Putting that aside, what risk controls are and aren't appropriate? An advantage of having a variety banks is that there's much less of a 'one size fits all' approach to banking services. I also don't have faith that a federally-run bank would be very flexible to anybody outside of the box. I've been in a situation where some bulge-brackets institutions wouldn't provide certain products since I didn't fit exactly in some pre-ordained image of what a customer would look like (and it wasn't even something you'd think a bank would have issue with.....)
germinalphrase 3y ago
“ if you teach at a public school for more than 5 years” That’s fairly misleading. It’s only a relatively small sub-set of public school teachers who are eligible. The TCLI Directory can be found here: https://studentaid.gov/tcli/directory-search https://studentaid.gov/tcli/directory-search
ChadNauseam 3y ago
> Student loans are also statutorily impossible to discharge in bankruptcy, unlike every other form of debt. If this weren't the case, student loans would just not be offered to anyone not deemed creditworthy. (Or they would only be offered by the government, who would offer them expecting to lose their money.) I think this would probably be a good thing, since easy access to student loans is probably related to why college has gotten so expensive, but the first-order implications of changing this policy are pretty detrimental to poor people.

no_wizard 3y ago

This is not at all how I understood the paper. It was to allocate consumer funds directly with the Fed to prevent bank runs from restricting access to cash on hand for consumers. They just move spigots to different institutions this way. Nominally, this is what the proposal is all about. I didn't see anything about the Federal Reserve or the Government being able to access that money on a 1:10 basis or any other reserve basis. It does however outline how this would stream line government policies and operations, such as Tax Refunds, Social Security Disbursements, or any other qualifying disbursements. Additionally, the idea that is also present in the paper is expanding low risk (demonstrably historically "safe" loans such as SBA Loans, FHA loans, traditional mortgages etc) through the Fed directly, but explicitly bans things like margin loans, PE bridges and other risky behavior. Which, as anyone who has gotten these kinds of loans, knows the government already does this, just with extra steps. The People's Ledger paper (proposal?) simply outlines removing extra steps and barriers for the citizenry to have a better banking baseline, all told. In essence, it makes the Central Bank, more....bank like. With some privileges, being a whole arm of the Government, its less focused on collecting fees and more interested in streamlining banking for the average citizen. It has nothing in the paper about forgiving mortgages (or student loans, for that matter) The paper is here, for anyone interested in this: https://scholarship.law.vanderbilt.edu/cgi/viewcontent.cgi?article=4780&context=vlr https://scholarship.law.vanderbilt.edu/cgi/viewcontent.cgi?a...

sclarisse 3y ago
Specific phrases many people will read as political allocation of capital: “Most objections to allowing significant quantitative growth of central bank balance sheets, in fact, reflect the underlying concerns about the qualitative, compositional aspects of such growth. Ultimately, however, these concerns are rarely substantiated by reference to anything more specific than deeply internalized skepticism toward the government as an economic actor. By contrast, this Article views the proposed change in the Fed’s liabilities as an opportunity to augment both (1) its ability to modulate credit-money supply more effectively, and (2) its potential to facilitate the more efficient allocation of that supply to productive enterprise.” “the NIA would transact directly in private financial markets, proactively channeling public and private financial resources into large-scale, transformative public infrastructure projects. Importantly, however, it would reverse the familiar pattern of “public capital, private management” typical of most modern “public-private partnerships” in favor of the “public management, mixed public-and-private capital” model.” Transformative infrastructure projects!! Are there any of those we’ve embarked on recently where the government’s proven more skilled at identifying investment opportunities than the market? Like, say, California high speed rail? What kind of returns is that investment earning? … oh. It’s true they didn’t get all the way to mortgage forgiveness in the paper, but, well, it doesn’t seem much of a stretch, particularly when Housing Is A Human Right (tm). We could call it infrastructure, in the same sense that “elder care is infrastructure” — I seem to recall recent legislative campaigns about that and other social spending.