The description of Step #9 of the Ten Steps to Properity (below), “Federal Ownership of All Banks,” begins this way:
Banks are involved in most U.S. dollar creation. Even the dollars created at the direction of the federal government originate with banks.
The two primary dollar-creation methods in the U.S. are bank lending and federal spending:
Each time a bank lends, it simply increases the numbers in the borrower’s checking account. That instantly adds dollars to the money supply.
When the federal government spends, it sends instructions to a creditor’s bank, instructing the bank to increase the numbers in the creditor’s checking account. When the bank does as instructed, dollars are added to the money supply.
This participation in the vast majority of all dollar creation gives banks enormous financial power, and as we all know — and the “Great Recession of 2008” reminds us — power corrupts banks, especially when multiplied by a profit motive and government complicity.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, and that makes all the difference. The government neither needs nor uses profits, and unlike bank employees, federal government employees do not receive remunerations based on federal agency profits.
Because the vast majority of banks are not federally owned, and so are monetarily non-sovereign and directed by the profit motive, America’s money supply is subject to criminality and insolvency.
Now, the Trump administration wishes to make an extremely dangerous situation even worse:
Officials Spar With Senators Over Plan For Mortgage Giants
THE ASSOCIATED PRESS — BY MARCY GORDON – AP BUSINESS WRITER
WASHINGTON (AP) — Trump administration officials on Tuesday defended their plan to Congress for ending federal government control of mortgage finance giants Fannie Mae and Freddie Mac, clashing with Democratic senators on whether the change would raise home borrowing costs and neglect lower-income homeowners.
The two finance companies nearly collapsed in the financial crisis 11 years ago and were bailed out at a cost to taxpayers of nearly $190 billion.
Bailing out Fannie and Freddie would have been unnecessary had they been owned by the federal government. The government, being Monetarily Sovereign, cannot unintentionally be insolvent.
Because the federal government cannot run short of dollars, no agency of the federal government can run short of dollars, unless Congress and the President will it.
As agencies of the federal government, Fannie and Freddie and all of America’s banks, never unintentionally would run short of dollars.
The “Great Recession” of 2008 was exacerbated by privately-owned banks running short of dollars, requiring “bailouts” by the federal government.
Though these bailouts cost taxpayers nothing (no tax was levied as a result and federal taxes do not fund federal spending), the need for bailouts did inject fear and uncertainty into the economy, which acted accordingly. The fear and uncertainty were nearly as harmful as the actuality.
Treasury Secretary Steven Mnuchin and Housing and Urban Development Secretary Ben Carson, along with regulator Mark Calabria, director of the Federal Housing Finance Agency, testified before the Senate Banking Committee on the plan for returning Fannie and Freddie to private ownership.
The companies have become profitable again and have fully repaid their bailouts. Under the plan, their profits would no longer go to the Treasury but would be used to build up their capital bases as a cushion against possible future losses.
If Freddie and Fannie were owned by the federal government, there would be no need to “build up their capital bases as a cushion against possible future losses.” Having an unlimited supply of money, the federal government creates money, ad hoc.
Fannie and Freddie together guarantee roughly half of the $10 trillion U.S. home loan market. They don’t make home loans.
They buy them from banks and other lenders, and bundle them into securities, guarantee them against default and sell them to Wall Street investors.
Calabria said Fannie and Freddie’s capital must be bulked up “to match their risk profiles” and avoid another bailout. “In their current financial condition, the (companies) are not equipped to withstand a downturn in the housing market,” he testified, adding, “It keeps me up at night.”
Mr. Cabria would not need to “stay up at night” if Fannie and Freddie were owned by the federal government.
The federal government would not have to “bulk up to match and risk profile” and never would need a bailout.
The administration promises in the plan to preserve homebuyers’ access to 30-year, fixed-rate mortgages, which are the pillar of housing finance.
The plan “would preserve the longstanding government support of the 30-year, fixed-rate mortgage loan,” Mnuchin said. “That support, however, should be explicitly defined, tailored and paid for.”
The administration’s “30-year” promises are humorous at best and deceptive at worst. Not only does this administration have zero credibility (the President lies incessantly), but at worst he will be in office for only five more years. What happens when a new administration takes over?
(Would you buy life insurance from a company that doesn’t pay its policyholders, and is guaranteed to go out of business in five years?)
Mnuchin acknowledged that for prices of 30-year mortgages to remain close to current market levels, some level of government support would be needed.
The most secure “level of support” would be ownership.
The administration initially looked to Congress for legislation to overhaul the housing finance system and return the companies to private shareholders.
But Congress hasn’t acted, and now officials say they will take administrative action for the core change, ending the Fannie and Freddie conservatorships. They haven’t given a timeline for the administrative action.
“Administrative action is even less secure than a law. It easily could be changed, without Congressional action, by the next administration. IF (big “IF”) legal, it still would be a silly step, even for the feckless Trump administration.
“The Trump plan will make mortgages more expensive and harder to get,” said Sen. Sherrod Brown of Ohio, the committee’s senior Democrat.
A flashpoint came over the issue of affordable housing. Fannie and Freddie currently have mandated targets for helping low-income and minority borrowers to buy homes.
A change outlined in the plan, which would have to be approved by Congress, would replace Fannie and Freddie’s affordable housing goals with more “tailored support” for first-time homebuyers and low- and moderate-income borrowers. “We want to do it in the most effective way,” Mnuchin said.
For a Trump appointee, “the most effective way” means a way that will most benefit rich investors.
And then we come to the always dependable Trump toady, Ben Carson:
Under Carson, HUD proposed last month to make it harder for people to prove unintentional discrimination, known as “disparate impact,” against mortgage lenders and landlords.
And finally, we come to the single most humorous comment in the article:
Sen. John Kennedy, R-La., implored the officials to put a proposal before Congress. “This whole thing is a car wreck; it’s a dumpster fire,” Kennedy said. Put it before the committee, “and let senators be senators.”
Letting senators be senators is something that has not happened under the leadership of Sen. Mitch McConnell, who frequently has vowed not to bring any legislation to the floor unless Donald Trump approves of it.
So in what way will senators be senators?
As we said in Step #9:
Allowing private ownership of banks and expecting honesty is like putting meat on a dog’s tongue, and expecting him not to swallow.
In Summary: No public purpose is served when the banking industry is in private hands. For many of the same reasons the U.S. Treasury is owned by the federal government, the federal government also should nationalize and run all banks.
Privatization is favored by the very rich because it almost always puts dollars into their pockets, while seldom working for the public. That is the Trump administration’s reason for wanting to privatize Fannie and Freddie.
All bank problems boil down to the profit motive.
We should eliminate those fundamental problems, and there is no better way to eliminate the profit motive than to put all banks under total federal government control, i.e. ownership.
Contact your Senators and tell them not to allow Trump and his cronies to steal at your expense.
Rodger Malcolm Mitchell
Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell
The most important problems in economics involve the excessive income/wealth/power Gaps between the richer and the poorer.
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.
Implementation of The Ten Steps To Prosperity can narrow the Gaps:
TEN STEPS TO PROSPERITY:
3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)
The Ten Steps will grow the economy, and will narrow the income/wealth/power Gap between the rich and you.