The Real Debate: Crony Socialism or Economic Sovereignty?

“Credit” can and should be a national utility, a public service provided by the government to the people it serves.  Many people are opposed to getting the government involved in the banking system, but the fact is that the government is already involved.  A modern-day RFC would actually mean less government involvement and a more efficient use of the already-earmarked $700 billion than policymakers are talking about now.  The government would not need to interfere with the private banking system, which could carry on as before.  The Treasury would not need to bail out the banks, which could be left to those same free market forces that have served them so well up to now.  If banks went bankrupt, they could be put into FDIC receivership and nationalized.  The government would then own a string of banks, which could be used to service the depository and credit needs of the community.  There would be no need to change the personnel or procedures of these newly-nationalized banks.  They could engage in “fractional reserve” lending just as they do now.  The only difference would be that the interest on loans would return to the government, helping to defray the tax burden on the populace; and the banks would start out with a clean set of books, so their $700 billion in startup capital could be fanned into $7 trillion in new loans.  This was the sort of banking scheme used in Benjamin Franklin’s colony of Pennsylvania, where it worked brilliantly well.  The spiraling-interest problem was avoided by printing some extra money and spending it into the economy for public purposes.  During the decades the provincial bank operated, the Pennsylvania colonists paid no taxes, there was no government debt, and inflation did not result.7