The Myth Of Financial Reform (Demo)

The September 23, 2013 issue of Time Magazine publishes an article by Rana Foroohar:

Five years on from the financial crisis, the disaster that was Lehman Brothers and its brutal, economy-shredding aftermath can seem a distant memory. We’re out of the Great Recession, and growth is finally back. America’s biggest banks are making record profits. The government is even earning money from its bailouts of institutions like AIG, Fannie Mae and Freddie Mac. The Obama Administration, which is pushing hard to complete the new financial rules mandated by the Dodd-Frank reform act deserves credit for making our financial system safe–or that’s the line being tossed around by current and past members of the crisis team.

But amid all the backslapping, a larger truth is being lost. The financialization of the American economy, a process by which we’ve become inexorably embedded in Wall Street, just keeps rolling on. The biggest banks in the country are larger and more powerful than they were before the crisis, and finance is a greater percentage of our economy than ever. For a measure of this, look no further than the Dow Jones industrial average, which just ditched Alcoa, Hewlett-Packard and retail lender Bank of America in favor of the most high-flying investment bank of all, Goldman Sachs.

Given all this, is your money really any safer over the long haul than it was five years ago? And have we restructured our financial industry in a way that will truly limit the chances of another crisis? The answer is still not an unequivocal yes, because banking is as complex and globally intertwined as ever. U.S. financial institutions remain free to gamble billions on risky derivatives around the world. A crisis in Europe, for instance, could still potentially devastate a U.S. institution that made a bad bet–and send shock waves through other key sectors, like the $2.7 trillion held in U.S. money-market funds, much of which is owned by Main Street investors who believe these funds are just as safe as cash.

Although this scenario isn’t necessarily probable–many U.S. banks have reduced risk and increased capital–it is possible. We’re relying on the banks’ good intentions and self-interest, a strategy that didn’t work out so well before. The truth is, Washington did a great job saving the banking system in ’08 and ’09 with swift bailouts that averted even worse damage to the economy. But swayed too much by aggressive bank lobbying, it has done a terrible job of reregulating the financial industry and reconnecting it to the real economy. Here are five things that are still badly needed to reduce the risks for everyone.

Unfortunately, the privately-owned Federal Reserve Bank has yet to support the policies that will result in substantial double-digit GDP growth while simultaneously broadening, private sector individual ownership in FUTURE wealth-creating,income-generating productive capital assets.

What is needed is to implement the Capital Homestead Act. (http://foreconomicjustice.org/?p=8942) with interest-free capital credit loans made available via super-IRA-typle CHA accounts, repaid with the future earnings of the investments. Thus, instead of the Federal Reserve slashing bankers’ cost of money, the capital credit loans would be directed to enrich ordinary Americans by systematically broadening private sector individual ownership of the formation of FUTURE productive capital investment to empower EVERY American to accumulate over time a viable capital trust (super-IRA) portfolio of stock in diversified companies and reap the full earnings payout of corporate earnings as dividend income to support their livelihood and retirement.

Right now the Federal Reserve creates money by loaning it to banks, who re-loan it multiple times because of fractional banking rules. With Capital Homesteading, money would be created by loaning it directly to citizens via banks at near-zero interest to invest in FUTURE wealth-creating, income-generating (full dividend payout) productive capital assets formed by producer companies. To build real wealth and also phase out our near-defunct social security scheme, the new full-reserve money would go into a long-term retirement account to be invested in dividend-paying, asset-backed shares of corporations. That way, money power would be spread to all citizens. The middle class would be invigorated using the principle of compounding interest, instead of being decimated by mushrooming public and personal debt.

The Federal Reserve could play a more positive role, removing artificial barriers to equal citizen access to acquiring and owning productive capital wealth. By creating asset-backed money for production, supported by growth-oriented tax policies, the Federal Reserve could truly help promote shared prosperity in a market system.

Support the Agenda of The Just Third Way Movement athttp://foreconomicjustice.org/?p=5797

Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice

Support the Capital Homestead Act athttp://www.cesj.org/homestead/index.htm andhttp://www.cesj.org/homestead/summary-cha.htm

See “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at NationOfChange.orghttp://www.nationofchange.org/financing-future-economic-growth-future-savings-solutions-protect-america-economic-decline-137450624 and “The Income Solution To Slow Private Sector Job Growth” athttp://www.nationofchange.org/income-solution-slow-private-sector-job-growth-1378041490.

http://content.time.com/time/subscriber/article/0,33009,2151806,00.html