"To get credit where it is needed--which is everywhere that business must get done--there are better ways, one of which is a legacy bequeathed to us by Andrew Jackson. The suspicions of a federally chartered central bank held by Jackson and the Jacksonian Democrats blocked the creation of such an institution for eighty years and, in its absence, brought with it eighty years of panics, confusion and monetary chaos.
When at last the United States created a national bank for itself in 1913, it came up with one that looks like nothing else on earth and certainly nothing like the Bank of England or the Bank of Japan or the European Central Bank. It came up with the Federal Reserve System.
In addition to the Federal Reserve Board in Washington, the system includes twelve regional, quasi-privately owned, quasi-independent banks, which in turn have twenty-five branches so that, taken together, they cover the nation. Their boards, which are required to have two-thirds non-banker membership, have their roots deep into the business communities of their respective areas of operation. Thus were the Jefferson-Jackson principles of decentralized, popular power incorporated into the banking system.
Because the regional banks are in direct and continuous contact with the more than 8,000 local banks and other institutions which take deposits from the public, they are an ideal vehicle through which credit can be made available to individuals and businesses quickly and directly.
With funds supplied by the Federal Reserve in Washington, the regional banks can negotiate the terms by which they can stuff the vaults of those 8,000 institutions with cash. With the cash comes the understanding that they must lend it, that they no longer need fear other banks will not repay them. The 8,000 banks can then contact their customers, car dealerships, factory owners, retail merchants, students looking for loans, real estate agencies and tell them that anyone with a good credit history will have no trouble getting a loan.
Such a scheme is not easily done, but it's doable. Thanks to the Jacksonian legacy we have the structure and the means to take care of the credit crunch or liquidity crisis on the local level. Some of those 8,000 banks will need propping up so that they do not go the way of WaMu. Many different arrangements with different banks will be necessary. Forcing that money into so many institutions so quickly will be sloppy and mistakes will be made but business and daily life can go forward.
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http://www.thenation.com/doc/20081013/howl>