Modernizing the US Treasury

During George Washington’s first term, Alexander Hamilton, serving as the Secretary of the Treasury, turned a serious liability into an asset, when he organized the first Bank of the United States.  The Continental Congress and the various states had run up debts during the War for Independence.  Hamilton recommended, and acheived, legislation to fund the debt using taxes on imports and simultaneously exchanging all of the IOUs to stock in the Bank, thus making that ‘paper’ an asset against which the bank could issue currency.  Hamilton also established the US Mint, denoting the currency as ‘dollars’ and that coinage would use a decimal system.  All in all, Mr. Hamilton brought the US Treasury into the modern 19th Century.

In the early 20th Century, the United States Federal Reserve Banks were established, modernizing our banking system.  The US Treasury still printed and minted our currency, but the Federal Reserve issues it.  Check a US paper bill.  You will see that it is labeled at the top, “Federal Reserve Note”  You will also find the seals of the Federal Reserve Bank that issued it and The Department of the Treasury.  There are also fascimilies of the signatures of the Treasurer of the United States and the Secretary of the Treasury.

But the 21st Century economy is moving toward a cashless society.  Just as the Federal Reserve and the Treasury print and issue paper currency and mint coins, absorbing the cost of their production, the two together should issue Cashless Currency, with the full faith and credit of the United States backing them.

I propose that the US Federal Reserve and the Treasury, produce  cash and debit cards tied to Federal Reserve bank accounts.  A percentage of the float that results from deposits would be used to buy US Treasury securities.  The interest earned from the securities would offset the costs incured in the operation of the cash cards.

I envistion two forms of the cards, one would be anonomous cash cards with a maximum amount allowed to be associated with them.  The other form would be tied to a given individual US citizen or legal resident.  These cards may be additionally tied to other banking accounts of member banks.  These cards would have photos and up-to-date biometric security features as the technology improves.

Why do we need the the Fed bank cards?  Because far too many people are ‘bankless’, as the conventional banks have abandoned the poor.  They are ‘ripped-off’ by unscrupulous “check cashing” businesses.  With federal bank cards in universal use, employers would directly deposit pay into individual debit accounts instead of issuing paychecks.  Senator Warren has suggested that US Post Offices provide some banking services to this population.  This concept could be tied into the Fed cash cards and debit cards.  Government services such as Social Security and welfare / food assistance can also be directly deposited into these accounts.  The modern cashless society is creating two classes of people, the “banked” and “unbanked”.  The governent can and must address this urgent and growing problem.

Another benefit of the Fed issuing these cards and accounts is that a universal electronic funds transfer system would be available for all transactions on the internet, including micro-payments.  Given that all transactions are “free”, this will reduce transaction costs, reducing friction in the economy, helping everyone.

Finally, I recommend that the cash card carry the image of Elinor Roosevelt, who tirelessly endeavored to lift our nation, especially the poorest, out of poverty during the Great Depression,while the debit card carry the image of Alexander Hamilton.  The cards should be the same color and design scheme as our present currency to foster trust through brand recognition.

This is an idea whose time has come.  It’s time that the US Department of the Treasury join the rest of us in the 21st Century.

Please forward this link to your US Senator and Congressmen.

Comments are closed.

%d bloggers like this: