On August 12, 2013, Senators Bernie Sanders and Elizabeth Warren write in The Huffington Post:
The decisions made by the next chair of the Federal Reserve will have a powerful impact on the economic well-being of every person in America.
While the largest financial institutions and corporations in this country have been bailed out and are now back to making enormous profits and rewarding their executives with outsized compensation packages, recovery hasn’t gone so well for the rest of America. Middle class families have continued to lose ground economically, the number of Americans living in poverty is near an all-time high, and the gap between the very rich and everyone else is growing wider.
The next Fed chair will have enormous power and influence over our entire financial system and the direction of the economy. The Fed is responsible not only for our country’s monetary policy, but it is also a key regulator of financial institutions. In our view, the president’s nominee for Fed chair must be committed to improving the lives of working Americans who are still struggling through the worst economic crisis since the Great Depression.
To that end, we think any Fed chair nominee should be able to answer the following four questions:
Question 1: Do you believe that the Fed’s top priority should be to fulfill its full employment mandate?
The U.S. continues to face a major crisis in unemployment. When Wall Street was on the verge of collapse, the Fed acted aggressively and with a fierce sense of urgency to save the financial system. Will you act with the same sense of urgency to combat the unemployment crisis in America today, and will you make clear what specific actions you will take? What rate do you think is acceptable and should be the Fed’s target?
Question 2: If you were to be confirmed as chair of the Fed, would you work to break up “too-big-to-fail” financial institutions so that they could no longer pose a catastrophic risk to the economy?
The financial institutions that are too-big-to-fail played a major role in undermining the American economy and driving our country into a severe recession in 2008. Yet today the four biggest banks are 30 percent bigger than they were then, and the six largest financial institutions now have assets equivalent to two-thirds of our GDP. By any measure, “Too Big” has gotten bigger. The risk they pose is clear. As Richard Fisher, President of the Federal Reserve Bank of Dallas, said last year, “institutions that amplified and prolonged the recent financial crisis remain a hindrance to full economic recovery and to the very ideal of American capitalism … Achieving an economy relatively free from financial crises requires us to have the fortitude to break up the giant banks.”
Question 3: Do you believe that the deregulation of Wall Street, including the repeal of the Glass-Steagall Act and exempting derivatives from regulation, significantly contributed to the worst financial crisis since the Great Depression?
The next chair of the Federal Reserve will play an important leadership role in dealing with too-big-to-fail banks and in shaping the rules that govern them, so it is important to assess the Fed chair’s views toward deregulation, particularly toward the massive deregulations of the 1980’s and 1990’s that permitted the TBTF banks to take on huge risks. There is a lot more work to do in implementation of the Dodd-Frank Act and to minimize the risk of future crises, and the Fed will play a critical leadership role.
Question 4: What would you do to divert the $2 trillion in excess reserves that financial institutions have parked at the Fed into more productive purposes, such as helping small- and medium-sized businesses create jobs?
Five years ago, the Fed bailed out the largest financial institutions in the country but put no restrictions on the funds to make sure that lending increased for small businesses. At the same time, the Fed began paying interest on excess reserves, and the excess reserves parked at the Fed have skyrocketed as a result rather than going into productive lending. The reality is that, despite promises and intentions that the Fed’s efforts would help support small businesses, much more work needs to get done to move money from Wall Street to Main Street.
The next Fed chair will have an opportunity to get our economy back on track and to help rebuild America’s middle class. But that will require the right temperament and a willingness to take on Wall Street CEOs when necessary. It is critical that the next Fed chair make a genuine, long-term commitment to supporting those who don’t have armies of lobbyists and lawyers to advance their interests in Washington — working and middle-class families.
Instead of a focus on “full employment” we need to focus on “full production,” by optimizing both human labor and non-human productive capital inputs that are the means of production for the products and services needed and wanted by society. But most important is that we finance FUTURE economic growth so that simultaneously we create new individual owners of the FUTURE productive capital assets that will be formed, and ensure that these individuals benefit from full voting rights in the private property stock shares they acquire using interest-free capital credit loans and receive the full dividend profit earnings generated by their stock holdings. In this way, we achieve both “full employment” (at least in the short-term as we build a FUTURE economy that supports general affluence for EVERY citizen), and broadened, private, individual ownership of FUTURE productive capital assets, preventing the further concentrated ownership that has been our history.
Without a policy shift to broaden productive capital ownership simultaneously with economic growth, further development of technology and globalization will undermine the American middle class and make it impossible for more than a minority of citizens to achieve middle-class status.
Unfortunately, pursuing democratic capitalism has been frustrated by the systemic concentration of economic power and exclusionary access to future capital credit to the advantage of the wealthiest Americans. The so-called 1 percent rulers of corporations have rigged the financial system to enable this already rich ownership class to systematically further enrich themselves as capital formation occurs and technological industrialization spreads throughout the world, leaving behind the 99 percent to depend on income redistribution through make work “full employment” policies, government boondoggles, excessive military build-up and dependence on arms production and sales, and social welfare programs due to the lack of an alternative to full employment and the growing economic helplessness and dependency. The unsatisfied needs and wants of society are not in that 1 percent or for that matter the 5 percent; those people are not the ones who are hurting.
Once the national economic policy bases policy decisions on two-factor binary economics1, productive capital acquisition would take place through commercially insured interest-free capital credit, resulting in a quiet revolution in which economic plutocracy will transform to economic democracy. As for redistribution, there should be a substitute for inheritance and gift taxes––a transfer tax imposed on the recipients whose holdings exceeded $1 million, thus encouraging the super-rich to spread out their monopoly-sized estates to all members of their family, friends, servants and workers who helped create their fortunes, teachers, health workers, police, other public servants, military veterans, artists, the poor and the disabled.
The Federal Reserve needs to stop monetizing unproductive debt, and begin creating an asset-backed currency that could enable every man, woman and child to establish a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income.
The CHA would process an equal allocation of productive credit to every citizen exclusively for purchasing full-dividend payout shares in companies needing funds for growing the economy and private sector jobs for local, national and global markets,
The shares would be purchased on credit wholly backed by projected “future savings” in the form of new productive capital assets as well as the future marketable goods and services produced by the newly added technology, renewable energy systems, plant, rentable space and infrastructure added to the economy.
Risk of default on each stock acquisition loan would be covered by private sector capital credit risk insurance and reinsurance, but would not require citizens to reduce their funds for consumption to purchase shares.
The end result is that citizens would become empowered as owners to meet their own consumption needs and government would become more dependent on economically independent citizens, thus reversing current global trends where all citizens will eventually become dependent for their economic well-being on our only legitimate monopoly –– the State –– and whatever elite controls the coercive powers of government.
See “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at NationOfChange.org http://www.nationofchange.org/financing-future-economic-growth-future-savings-solutions-protect-america-economic-decline-137450624
Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm
