Trust Banking System
Description
Uli Kortsch:
"Our proposed solution is a Trust Banking System, under which the creation of money would be safeguarded by a transparent entity, the Monetary Commission. Although independent, it would be operated by the Federal Reserve Bank but owned by Treasury (which is equal to being owned by the citizens). In essence, the creation of money would be democratized. The money created by it would be injected into the economy as broadly as possible. This means that rather than pull the public and country further into debt, that money would work in the public interest to create jobs and fuel the “real economy,” which is the part of the economy that is concerned with producing goods and services, as opposed to the part of the economy that is concerned with buying and selling on the financial markets.
In a Trust Banking System, when a deposit is made at a deposit bank into the depositor's account, through the Depository Window, the funds continue to belong to the depositor (rather than becoming an IOU of the bank as under the current system). This would all be covered under the standard depository agreement between the bank and the customer. 100% of the depository base will at all times be covered by cash in the vault or deposits at the Fed. The only source of income for a bank from the Depository Window would be for payment services. No deposit creation would exist in this system and thus no new money could be created by private banks. Further, because all deposits would at all times be fully covered, the needed oversight would be minimized as the system is autonomously stable and ruinous bank runs would be impossible, as cash would always be available for withdrawal.
Additionally, under the Trust Banking System, lending banks would be separate institutions from deposit banks. They would be true intermediaries (as most think that banks are today) that offer investment products to those with cash wishing to have it invested, and then invest this cash, by lending it out or purchasing securities. This would be done through the Credit Window of banks but none of the funds under the Depository Window would be available for this purpose. Instead, savers and investors would subscribe to a series of offered mutual funds in say, car loans, or mortgages, or commercial loans of various kinds, and so on. These could be open or close-ended funds as desired with maturities, risk levels, and expected return levels published by the bank in advance. Thus credit would now be driven by savings rather than by deposit creation. Savers would again be rewarded for savings and interest rates would be controlled by the market rather than largely by Fed edict and actions as they are now. Has this been done before?" (vie email)