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6 May, 10 tweets, 4 min read
Goofus: federalreserve.gov/newsevents/pre…
Gallant: bankofengland.co.uk/-/media/boe/fi…
The Fed has a ways to go to get its Fintech access rules in good order. Fortunately, the ones I've posted are preliminary only. The Fed is now seeking comments for their improvement: federalreserve.gov/newsevents/pre…:
Unfortunately, the bankers have been doing a full-court press aimed at making FinTechs bear the same regulatory burden (capital req's especially) as ordinary banks. This makes little sense for Fintechs that provide payments services but don't make loans.
It makes even less sense for ones won't take any risks at all with clients' money. Yet the bankers would rather not have the Fed recognize this. A "one size fits all" regulatory mantra suits their aim of denying would-be rivals direct access to the Fed's settlement services.
The rules put in place by the Bank of England in 2017, when it opened its doors wide to "non-bank PSPs", but only proved they do not engage in "maturity transformation." Most will keep 100% of funds received to be transferred in their Bank of England settlement accounts.
It is only through such an arrangement that Fintech payment services can truly flourish. Otherwise they need to rely on banks--their rivals--for access to the Fed--a losing proposition.
Whatever else they think the Fed should do, those who care about improving "unbanked" person's access to the non-cash payment system should encourage the Fed to follow the Bank of England's example.
In England and in many other places, non-bank PSPs have worked wonders in bringing 21st century payments technology to the masses, including people without bank accounts. It's a disgrace that they haven't yet been able to do the same right here in the good ol' U.S. of A.
So help me out, if you can, in this fight. It's going to take all our efforts to counter the big banks' self-serving propaganda. @MehrsaBaradaran @MorganRicks1 @DanAwrey @LevMenand @CaitlinLong_ @Aarondklein @DavidBeckworth @FintechDiego @vtg2 @greg_ip @ProfKateJudge

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More from @GeorgeSelgin

George Selgin Profile picture
7 May
In _Denationalisation of Money_, Hayek supposed that competing private fiat-like monies would vie for market share by demonstrating their stable purchasing power. But, as I observed many years ago, Hayek overlooked something of fundamental importance.
He assumed that private individuals, in deciding which monies to prefer, would judge them by their _macroeconomic_ merits. In that case, the macroeconomically best would win. Hayek assumed this would mean those with the most stable purchasing power.
Granting Hayek's assumption for the sake of argument, his conclusion was a non-sequitur. In choosing what money to prefer, why would people act differently than they do in choosing other goods or assets? Why not pick the fiat-like money promising the greatest _private_ gains?
Read 11 tweets
George Selgin Profile picture
5 May
The response of BPI (the big banks' lobby) to the Fed's request for comment on Master Account approval guidelines, shown in follow-up tweets, should leave no doubt that this is about terms for granting such accounts to fintechs holding "special" bank charters.
BPI's comment reads, "The issue of who can access the Federal Reserve’s payment system is an important one, and it is good that the Fed has sought comment on the complex questions surrounding it. Historically, only regulated and supervised banks have been permitted access, ...
"and if Big Tech and FinTech firms seek that right, the question is whether they ought to shoulder the traditionally associated responsibilities, and whether further protections are warranted given that they are uninsured and lightly regulated,...
Read 4 tweets
George Selgin Profile picture
5 May
In the Spring of 1941, @zachdcarter observes in his excellent book, _The Price of Peace_, Keynes's "marked emphasis on inflation surprised some of the economists, who, after so many years of depression, were still focused on employment as the topic national economic concerns. ...
"But with the war orders coming in on a massive scale, Keynes insisted that is was only a matter of time until rapid price increases took effect. Americans would need to prepare to have a battle plan ready when they did."
The most recent stats then available (for March 1941) put the 12 month CPI inflation rate then at 2.26%--its highest level since 1937. This March the 12 month CPI inflation rate was 2.6%--its highest level since August 2018.
Read 8 tweets
George Selgin Profile picture
3 May
My sincere desire (and I think Nathan will agree) is that we go beyond both sweeping celebrations and sweeping condemnations of the New Deal to better understand both its successes and its failures.
Too much “mythologizing” infects both extreme views. Take one simple myth both sides subscribe to: that the New Deal was inspired by Keynes’ ideas. One side celebrates it for this foresight; another confirms it as it does Keynesianism writ large.
In fact, Keynes had little influence on the New Deal; while he praised some aspects of it, he was highly critical of others as impeding recovery. FWIW, my own view is that, had his advice actually been heeded, we’d have seen a much more rapid and complete post-1933 recovery.
Read 4 tweets
George Selgin Profile picture
3 May
What Nathan dismisses as a @m
What Nathan dismisses as a myth here was accepted by scholars and observers of all persuasions at the time and long since. It is he who is promoting a myth of near complete recovery before the ‘37 crash.
Relief and recovery were very distinct objects. The New Deal programs were successful in one. Less so in the other. No toying with statistics will change that reality.
Read 5 tweets
George Selgin Profile picture
21 Apr
This is...it's...I mean...ah, what's the use?
Still I'll try: monetary expansion DOES create wealth when it prevents what would otherwise be a shortage of exchange media. Such a shortage can result in recession and unemployment. That is, it can destroy wealth. Monetary expansion adds to wealth by preventing that outcome.
Economists of practically all schools have long understood this exception to the rule that monetary expansion only causes inflation. I mean economists going back to G. Poulett Scrope and John Stuart Mill! It is not just a "Keynesian" idea, though he shared it.
Read 7 tweets

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