Restore Federal Reserve Control Over Money Supply

August 8, 2012 at 9:55 AM Leave a comment

Banks too big to fail? In need of a bailout? Maybe it’s time to help them out…Let the banks sell the Federal Reserve their ATM networks. Then they can get back to being local banks that serve their customers.

I am a child of a Federal Reserve Bank family. My dad worked there, starting on the night shift in the mail room. There he met my mother, who worked in another department with her sisters, one of whom also met her husband there, a bank examiner. Mom was in the now-defunct Check Collections department, the clearinghouse for checks back in the days of the nation’s money supply being defined by cash and demand deposits, i.e., checking accounts. Dad eventually became manager of the Money Department, where they counted each bank’s money on a regular basis to ensure that they met their reserve requirements.

Back in those days, the Federal Reserve Bank had its hands on the money supply, quite literally. While many of its operating procedures would be considered quaint today,* the notion that the Fed could actually manage the money supply should have been a keeper.

Unfortunately, the new money supply and purchasing power might be better tracked through the ATM networks and the credit card clearinghouses…which reside in the private sector. While ATMs nullified the system of float, the useful delay in money transfers due to the Fed’s handling of checks, they could offer an early warning system for issues in the system.

Call me old fashioned, but the next time a major bank threatens to destabilize  the world economy with its imprudent financial shenanigans, Tim Geithner and Ben Bernanke should offer them a deal they can’t refuse: their ATM networks or their life. And if that’s not enough to cover their losses, ask them to throw in the credit card clearinghouses as well.

* As a child, I marveled at all the ladies, each with a million dollars on her desk waiting to be counted, and the furnace where they burned old money. As an adult, I wondered if the fleet of Brink’s trucks carried the same payload of money around the block and back to the Fed each day to be recounted under the banner of a different institution…but, of course, that was after my baby sister went to work in the “Trust” Department.

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Entry filed under: Special Rants.

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