Jul 21, 2018

Can Central Banking Help Underserved Americans?

America is experiencing the longest period of low public trust for the federal government in over 50 years. Fewer than two in ten Americans trust the federal government to do what is right “just about always” or “most of the time.” But Morgan Ricks, a former U.S. Treasury Department adviser, believes that trust—and much more—could be restored if the Federal Reserve would offer a public option for bank accounts.

Millions of Americans each year are pushed out of the banking system and forced into payday loans and check-cashing centers, alternatives that can lead to larger financial problems. Ricks and his group argue the benefits FedAccounts could offer would remove many of the obstacles that have left 27% of the US “unbanked” or “underbanked.”

“FedAccounts would be a public option for the unbanked and underbanked while also providing financial stability and other substantial benefits to businesses and our economy as a whole,” said Ricks. “People would experience this organ of the federal government working directly for them.”

Ricks and co-authors of the paper “Central Banking for All: A Public Option for Bank Accounts” list some of the potential benefits of their plan:

  • Faster and more efficient business transactions
  • No fees or minimum balances
  • The same low interest rate commercial bank accounts receive
  • Bolstered financial and macroeconomic stability
  • No interchange fees for debit card transactions

Ricks and coauthors acknowledge the objections to central banking for the public, but they believe the massive benefits outweigh any of the costs. “Aside from banks and certain shadow banking institutions whose existing business models FedAccount would disrupt, practically every other segment of the American economy is likely to benefit.”

Beyond financial implications, the group believes central banking could serve a larger and nobler purpose. “We think FedAccount could play some role, however modest, in restoring doubting Americans’ faith that the government can make a positive difference in their daily lives. This would be no small accomplishment.”

This proposed banking solution could connect Americans with the federal government in revolutionary ways, helping public trust begin to climb out of historically low depths. And the timing couldn’t be better. FedAccounts may be exactly what America needs to restore confidence and bolster economic stability for the future.

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About the author

Andrew Mosteller
Andrew Mosteller is a freelance writer and regular contributor to Lendio News. His upbringing in an entrepreneurial family nurtured a passion for small business at a young age. Andrew's father, an equity fund manager, taught him the ins and outs of investment financing. Now, Andrew spends his time writing copy for business owners, helping them expand and advertise their unique brands. He's also studying Strategic Communications at the University of Utah. When Andrew's fingers aren't glued to the keyboard, he spends his time reading, podcasting, composing music, and bombing down the ski slopes.

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