• Steve Muehler

Steve Muehler's Plan to Guarantee Bank Basic Checking & Savings Accounts for all Citizens

Updated: May 12



Access to financial services, or “financial inclusion,” has long been recognized as a critical step towards escaping poverty. Having a bank account enables people to protect their savings, diversify risk, lower transaction costs and access credit to invest in their human or physical capital.


Financial inclusion has become a top priority for international agencies like the World Bank and the IMF, as well as for nonprofits like the Bill and Melinda Gates Foundation, which also has donated millions to fund financial inclusion initiatives across the world.


Although these efforts have largely focused on the developing world, financial inclusion has increasingly become a policy concern in the U.S. Despite being one of the world’s richest nations, a surprisingly large share of the U.S. population lacks access to formal financial services. In 2017, the FDIC reported that roughly 6.5 percent of U.S. households (8.4 million households; 14.1 million adults and 6.4 million children) were “unbanked,” meaning that no member of the household held a checking or savings account at a formal financial institution.


Another 18.7 percent (24.2 million households) were classified as “underbanked,” meaning that they had an account at an insured institution but also obtained financial services from outside the formal financial system. Although unbanked rates are highest in rural areas, most of the unbanked live in urban centers. These rates are particularly high in minority and immigrant communities. African Americans (16.9 percent) and Hispanics (14 percent) were four to five times more likely to be unbanked than Whites (3.0 percent) and Asians (2.5 percent).


While these figures aren’t high relative to less-developed nations, they are high relative to other OECD nations. In Western Europe, the financial inclusion rate exceeds 97 percent. Canada enjoys a financial inclusion rate of 99.7 percent.


Numerous proposals have been put forward for how the U.S. Government can reduce financial exclusion. Two of the most prominent – Postal Banking and FedAccounts


Postal Banking and FedAccounts:


Two specific proposals for combating financial exclusion have recently garnered media attention. The first is to revive the Postal Savings System that existed from 1911 to 1967. Postal banking allows post offices to double as small-scale savings banks. It targets low-income citizens, particularly in rural areas, who lack access to a nearby bank branch, cannot afford bank fees, or have too little savings to open an account. Postal savings accounts require no minimum balances and minimal fees. Any citizen could make deposits and access basic financial services at any of the 30,000 post offices around the country. Postal banking has been endorsed by several economists, law professors and 2020 presidential candidates like Elizabeth Warren and Bernie Sanders.


If you follow my Blog, you will recall about a year ago I proposed selling the U.S. Postal System. Though I like the Postal Savings System, I do not fully support the idea as I do not support keeping the U.S. Postal Service as an asset of the United States Government.


The second idea, and probably the more novel proposal, that is gaining traction is to enlist the Federal Reserve in the fight against financial exclusion.In a 2018 working paper “A Public Option for Bank Accounts (Or Central Banking for All),” legal scholars Morgan Ricks, John Crawford, and Lev Mandand argue that policymakers should expand the Fed’s mandate to include achieving universal financial inclusion. According to the plan, the Fed would no longer restrict its clientele to banks. It would allow the public to open transaction accounts, called FedAccounts. FedAccounts would be open to all legal residents and firms, with no fees or minimum balance requirements. The Fed would invest deposited funds in the assets it typically buys, namely U.S. Treasuries. It would pay depositors the same interest on reserves (IOR) rate that commercial banks receive on their balances at the Fed.


Since most transactions today are conducted without cash, FedAccounts would be largely digital. This idea is somewhat similar to another idea that has been explored by central bankers and IMF officials that calls for central banks to jump into the digital payment and/or blockchain game by offering the public “central bank digital currency” (CBDC). However, to accommodate whatever demand there is for cash deposits and withdrawals, the authors propose installing “Fed ATMs” at select public locations across the country and enlisting trained workers as clerks for the program (propose small community retail teller windows, either at or near Sheriff's Departments, County Courthouses, or other secure location on State or Federal Property).


Under my Administration, we would work to pass a FedAccounts Bill that ensures that all Citizens of the United States have access to a basic Checking or Savings Account. These accounts would not offer the types of services offered by a commercial bank (ie, overdraft protection, etc). These would be simple checking & savings accounts with a debit card for deposits and withdrawals. All Citizens should be able to know that they have a financial institution for the safe keeping of their dollars, and under my administration this would become a reality.


Steve Muehler is the Founder & Managing Member of the Private Placement Markets:

About Mr. Steve Muehler, Founder & Senior Managing Member:

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© 2017 by Mr. Steven J. Muehler