An Open Letter to Congress:

A “Critical-Care” Bailout for Main Street in the Face of COVID-19 –

How Public Banks Can Reboot the Real Economy

These four immediate actions will prevent financial catastrophe in our communities

and set them up for future fiscal health.

Honorable Members of the 116th United States Congress:

The Public Banking Institute has been working since 2011 to return control of money and credit to states and communities and create a network of publicly-owned federal, state and municipal banks that would establish a safe, low-cost alternative to the current exploitative financial system controlled by Wall Street. Our Board and Advisory Board members include noted economists, bankers, professors, authors, and organizational leaders. Our letter outlines four immediate actions needed to rescue the Main Street economy following the coronavirus shutdowns and ensuing financial collapse and shows how they can be done without imposing additional taxes or driving up consumer prices.

Immediate actions:

#1: Put real money into the real economy. We show how at least $1,200 per month can be paid to all US adults, not just once but as long as needed.

#2: Put money in people’s hands NOW. We detail two innovative options for immediate payment even to the unbanked using existing facilities.

#3: Get money to the states. We show how states can get 0% loans.

#4: Cancel debts. We show how debts can be canceled without driving the creditors into insolvency.



These relief measures can be funded by tapping into the same money tree Congress and the Fed just used to fund a $4 trillion-plus bailout for Wall Street and Corporate America, as detailed below. States and municipalities can tap into the Fed’s 0% rates by setting up their own publicly-owned banks by emergency powers. These banks can provide the low-cost credit communities urgently need during this pandemic, granting 1% loans as Germany’s public bank KfW does, vs. the complex SBA programs charging 3.75%. The time to act is now. As PBI Advisory Board member Thomas Hanna stresses, “During a time of crisis, government interventions backed with public funds could, and should, be used to assert more democratic control over economic decision-making.” Turning the central bank into a true public utility and establishing a stabilizing network of public banks via these emergency actions will save Main Street’s economy from disaster and build the trustworthy publicly-owned financial infrastructure necessary to keep it healthy long term.

#1: Put real money into the real economy with monthly $1,200 payments to all US adults as long as needed, funded through the Federal Reserve.

The Fed has now agreed to monetize Treasury debt via quantitative easing in unlimited sums. The loans can be rolled over indefinitely (as all federal debt effectively is), with the interest returned to the Treasury. Why these monthly payments will not result in Zimbabwe-style hyperinflation is explained in PBI papers here and here.

#2: Put money in people’s hands NOW, by direct deposit into either Post Office Savings Accounts or Treasury Direct accounts.

People cannot wait months for relief checks. Rent is due now. One in four U.S. households has no access to a bank account, and many are without homes or permanent addresses. PBI Advisory Board member Prof. Mehrsa Baradaran proposes restoring free postal savings bank accounts available at local post offices for direct deposit of relief checks. PBI Advisory Board member Prof. Bob Hockett proposes creating new Treasury Dollar Bills, equivalent to Fed dollar bills, which the Treasury can issue digitally and deposit into Treasury Direct, the Treasury’s existing universal account system, allowing citizens and legal residents to quickly open accounts.

#3: Get money to the states through publicly-owned banks.

States are facing a tsunami of emergency expenses, collapsing tax revenues, and massive bills for unemployment compensation, pushing state budgets heavily into the red. The Fed is now bailing out financial institutions and corporations of all stripes with 0% loans, but it has bypassed state and local governments. States can access 0% loans from the Fed either:

(a) under Federal Reserve Act sec. 14(2)(b), providing for 6 month loans to states and municipalities, such loans to be rolled over as needed; or

(b) by setting up their own public banks using their emergency executive powers. The stellar example is the state-owned Bank of North Dakota. The money needed to start a public bank (capitalization) can be acquired either from funds allocated by Congress to states under the CARES Act or from existing revolving loan funds or rainy day funds. This capital can then be leveraged into 10 times that sum in loans. By eliminating profiteering middlemen, banks can become public utilities that can lend during a crisis to stimulate local economies while generating profits for local governments.

#4: Cancel debts held by the federal government as well as private debts without impairing the rights of creditors, by moving them onto the books of the Treasury’s new Special Purpose Vehicles (SPVs).

As PBI Advisory Board member Prof. Michael Hudson observes, “Debts that can’t be paid won’t be.” Moratoria to delay due dates will not be enough. “If the U.S. government can finance $4.5 trillion in quantitative easing, it can absorb the cost of foregoing student and other debt,” writes Hudson. “And for private lenders, only bad loans need be wiped out.” He writes that it is fair to write down debts to the realistic ability of borrowers to pay, without imposing forfeiture of property or degradation of living standards on the borrowers. For the rest, and particularly for debts the government oversees, it could immediately initiate a debt jubilee by moving the bundled securitized debt into a Treasury-owned SPV of the sort set up in the CARES Act to bail out businesses and financial institutions. The Treasury’s SPVs are a form of shadow bank (explained here), which are capitalized by the taxpayers and should be available to them.

America is at a crossroads. New York City Comptroller Scott M. Stringer has said the city will face mass homelessness without a comprehensive plan. But relief for all is possible, if the central bank is run as a true public utility. Through these four actions, Congress can not only reboot an economy in free-fall but also create the trustworthy financial infrastructure necessary for long-term economic prosperity for the entire nation. Congress must take bold actions to benefit the public right now; and public banks, including postal banks of the sort we had in the early 20th century, are a major part of the solution.

For additional information, please contact the Public Banking Institute, call: 315 228 8652 or email: Office@PublicBankingInstitute.org.