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Comment by gsatic | Hacker News Reader

Fed is moving so slowly compared to China or India. Going to be left in the dust soon.

They need to open settlements up to everyone not just "financial institutions". Fed deposit accounts for everyone or Interest bearing CBDCs should be rolled out to every one. The fucking banks need to be disintermediated from all transaction involving Depositors. Convert them to pure lenders.

If the goal is to "improve settlement efficiency without introducing liquidity or credit risks" then provide a path to get the dumb sender and receiver banks out of the loop in every dumb transaction.

If I want to send my grandma cash, why do 2 banks have to be sitting in the middle? It's 2023 get those fuckers out of the loop. So when the next bank collapses due to "credit and liquidity risks" they haven't thought about why should grandma worry about her savings?

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If you're actually interested in why the US banking is so fragmented, it's on purpose and it works very well. The US wants banks to be small to distribute risk and encourage local investment. Small banks and credit unions are much more willing to give small business loans, auto loans, etc. to people/clients with worse credit, etc. These policies only work if small and medium banks have depositors so that's why everyone has a different local bank, etc.

> ...worry about her savings

All deposit accounts are insured up to $250k and (given recent events) unlikely the Fed would even allow any regular persons deposits to be at risk. Essentially, the Fed can't loan or invest like small/medium banks can. The Fed can't go bankrupt so it has no real way to measuring risks when giving out loans which would make it impossible to price loans.

What does any of that have to do with electronically sending and receiving money?

gstatic is correct with this:

>If I want to send my grandma cash, why do 2 banks have to be sitting in the middle?

The US government should be offering electronic money accounts to everyone as a utility, and they should be constitutionally guaranteed (even to felons), with no ability to lose them. Anyone should be able to send and receive money at any time. In conjunction, US government should also provide identity verification services as a utility, utilizing the USPS, which they already use to verify identity for US passports.

If people then want to invest their money, then they can make that choice individually.

Instead what will happen is they will gamify your deposits (see what the WEF says about CBDCs) or freeze them because you hit some AML rules and you will have no recourse

Hence the need to amend the constitution.

If people were depositing their money with the Fed then traditional banks wouldn't have (as many) deposits.

How are you getting money into this "FedAccount" does your paycheck get sent directly to it? Do you first send money from another bank? If it's the former option then real banks will have less money to lend, if it's the latter option then it's no different then using Zelle or any other intermediate.

Honestly what you want sounds exactly like what the Fed is building which is a common electronic exchange platform. I agree with the other points in that I hope this is mandatory to some degree.

> If people then want to invest their money, then they can make that choice individually.

I think you're underestimating how much such a service (if it accepted direct ACH from your job) would impact our current banking system. Companies would just bypass actual banks and send all paychecks to everyone's "FedAccount" that would be billions of dollars moved. Money in real banks is lent out, money in a "FedAccount" would/couldn't be (if banks have fewer deposits then they can't get as much money from the Fed). This isn't just adding a minor service for the government to provide, it would be a complete redesign of our monetary policy. A lot of countries wish they could have a banking environment as diverse as the US, it's a huge feature not a bug.

> How are you getting money into this "FedAccount" does your paycheck get sent directly to it? Do you first send money from another bank?

No, electronic money is just a number in a database. The US government can give you an account number like any other bank does now. Of course, you would still have the option to use a non US government electronic money account.

>If it's the former option then real banks will have less money to lend,

Yes, currently banks are earning money for an inefficiency from back in times when cash was the primary money. A lot of their purpose is obviated with todays’ technology of computers, databases, and instant communications.

> Companies would just bypass actual banks and send all paychecks to everyone's "FedAccount" that would be billions of dollars moved.

Possibly, if that is what people want.

>Money in real banks is lent out, money in a "FedAccount" would/couldn't be (if banks have fewer deposits then they can't get as much money from the Fed).

Banks can still offer people interest to entice them to deposit funds with them rather than the US government.

> These policies only work if small and medium banks have depositors so that's why everyone has a different local bank, etc

Ofcourse. But this should be a choice. Depositors should be allowed to choose between a fed deposit account or a local bank deposit.

This separation of payment processing on the one hand and savings and loans on the other is something I hope to see in CBDC proposals.

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