| May 4 2019 |
Modern Monetary Theory: The Very Basics |
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X Should only be permitted to lend directly to borrowers.
All loans would have to be shown and kept on their balance
sheets. This would stop all third-party commission deals
which might involve banks acting as "brokers" and on-selling
loans or other financial assets for profit.
X Should not be allowed to accept any financial asset as collateral
to support loans. The collateral should be the estimated value of
the income stream on the asset for which the loan is being advanced.
This will force banks to appraise the credit risk more fully.
X Should be prevented from having "off-balance sheet" assets, such as
finance company arms which can evade regulation.
X Should never be allowed to trade in credit default insurance.
This is related to whom should price risk.
X Should be restricted to the facilitation of loans and not engage in
any other commercial activity.
So this is not a full-reserve system. The government can always dampen
demand for credit by increasing the price of reserves and/or
raising taxes/cutting spending.
Bill Mitchell, "100-percent reserve banking and state banks"