[Sosfbay-discuss] FW: The US Economic Crisis: The Way Out

[Drew Johnson]

From: Yvonne [mailto:yvonne at enfinitee.com]
Sent: Saturday, November 15, 2008 5:02 PM
To: 'Yvonne'
Subject: The US Economic Crisis: The Way Out

I usually don't mass email. But, I thought this article was important
enough to distribute widely.

Essentially, the article points out that private banks, along with the
Federal Reserve (which is a privately-owned cartel not a government-run
institution) together, have usurped the government's power to create
money, issue credit and collect interest. The author, Ellen Hodgson Brown,
suggests that like Benjamin Franklin’s colonial Pennsylvania banking
system -- we the people -- should take back the right to create money,
issue credit and collect interest. She offers a clear plan forward showing
exactly what to do with the $700 billion bailout package in the section
titled "Credit as a Public Utility" below.

I encourage you to read this article thoroughly and email it to your
colleagues, friends and family. I would really love it someone on Obama's
transition team pitched this idea to the President-Elect. If you know how
to get this information to Obama's transition team -- please do it.

http://www.webofdebt.com/articles/modest_proposal.php by Ellen Hodgson
Brown, J.D., author of Web of Debt

Comments and input welcomed.

Warm regards,
Yvonne

Excerpt from the article:
The New Deal Revisited

Today’s credit crisis is very similar to that facing Franklin Roosevelt in
the 1930s. In 1932, President Hoover set up the Reconstruction Finance
Corporation (RFC) as a federally-owned bank that would bail out commercial
banks by extending loans to them, much as the privately-owned Federal
Reserve is doing today. But like today, Hoover’s plan failed. The banks
did not need more loans; they were already drowning in debt. They needed
customers with money to spend and to invest. President Roosevelt used
Hoover’s new government-owned lending facility to extend loans where they
were needed most – for housing, agriculture and industry. Many new federal
agencies were set up and funded by the RFC, including the HOLC (Home
Owners Loan Corporation) and Fannie Mae (the Federal National Mortgage
Association, which was then a government-owned agency). In the 1940s, the
RFC went into overdrive funding the infrastructure necessary for the U.S.
to participate in World War II, setting the country up with the
infrastructure it needed to become the world’s industrial leader after the
war.

The RFC was a government-owned bank that sidestepped the privately-owned
Federal Reserve; but unlike the private banks with which it was competing,
the RFC had to have the money in hand before lending it. The RFC was
funded by issuing government bonds (I.O.U.s or debt) and relending the
proceeds. The result was to put the taxpayers further into debt. This
problem could be avoided, however, by updating the RFC model. A system of
public banks might be set up that had the power to create credit
themselves, just as private banks do now. A public bank operating on the
private bank model could fan $700 billion in capital reserves into $7
trillion in public credit that was derivative-free, liability-free, and
readily available to fund all those things we think we don’t have the
money for now, including the loans necessary to meet payrolls, fund
mortgages, and underwrite public infrastructure.
Credit as a Public Utility

“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

Like the Pennsylvania bank, a modern-day federal banking system would not
actually need “reserves” at all. It is the sovereign right of a government
to issue the currency of the realm. What backs our money today is simply
“the full faith and credit of the United States,” something the United
States should be able to issue directly without having to draw on
“reserves” of its own credit. But if Congress is not prepared to go that
far, a more efficient use of the earmarked $700 billion than bailing out
failing banks would be to designate the funds as the “reserves” for a
newly-reconstituted RFC.

Rather than creating a separate public banking corporation called the RFC,
the nation’s financial apparatus could be streamlined by simply
nationalizing the privately-owned Federal Reserve; but again, Congress may
not be prepared to go that far. Since there is already successful
precedent for establishing an RFC in times like these, that model could
serve as a non-controversial starting point for a new public credit
facility. The G-7 nations’ financial planners, who met in Washington D.C.
this past weekend, appear intent on supporting the banking system with
enough government-debt-backed “liquidity” to produce what Jim Rogers calls
“an inflationary holocaust.” As the U.S. private banking system
self-destructs, we need to ensure that a public credit system is in place
and ready to serve the people’s needs in its stead.

Ellen Brown, J.D., developed her research skills as an attorney practicing
civil litigation in Los Angeles. In Web of Debt, her latest book, she
turns those skills to an analysis of the Federal Reserve and “the money
trust.” She shows how this private cartel has usurped the power to create
money from the people themselves, and how we the people can get it back.
Her eleven books include the bestselling Nature’s Pharmacy, co-authored
with Dr. Lynne Walker, and Forbidden Medicine. Her websites are
www.webofdebt.com and www.ellenbrown.com.

1 Michael Hiltzik, Ken Bensinger, “Bank Rescue Plan to Test Capitalism,”
Los Angeles Times(October 12, 2008). 2 See Ellen Brown, “It’s the
Derivatives, Stupid! Why Fannie, Freddie and AIG All Had to Be Bailed
Out,” webofdebt.com/articles (September 18, 2008). 3 Ian Welsh, “Paulson
to Use Fannie and Freddie as Conduit to Bail Out His Friends,”
firedoglake.com (October 11, 2008). 4 “Commercial Paper Funding Facility:
Frequently Asked Questions,” newyorkfed.org (October 14,2007). 5 See Ellen
Brown, “Dollar Deception: How Banks Secretly Create Money,”
webofdebt.com/articles (July 3, 2008). 6 Chris Cook, “A New Dawn for
Iran,” Asia Times (October 9, 2008). 7 See Ellen Brown, “Credit Default
Swaps: Derivative Disaster Du Jour,” webofdebt.com/articles (April
10,2008).
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