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Comment by yholio | Hacker News Reader

Omarova suggested the central bank could offer bank accounts to everyday Americans, which would represent a dramatic departure from the way the banking system is currently set up.

Enthusiastically this! The payment system is essential infrastructure, with the demise of cash it will become effectively impossible to function in society without access to banking. Meanwhile, this service is provided by for profit agents that can deny your business for no reason and rely on an arcane industry of background checks and trafficked personal data to select their clientele.

Mind you, I'm talking about free payment services, the process of receiving and sending money, and a possible free debit payment network operated by the government, that guarantees service to anyone. If you need credit, you go to a bank, they can and should make money out of this, not by simply forming a payment cartel extracting rent from all businesses and citizens.

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If only we had a technology solution to payments and money transfer that didn’t depend on the whims of anyone, some sort of distributed cryptographically secured system?

What system is that? Keep in mind that such a system has to be able to handle the TPS necessary.

Bitcoin, which can handle unlimited TPS.

The vast majority of US dollar transactions happen off of the Fed's official ledger. Similarly, the vast majority of bitcoin transactions need not happen on the blockchain. That's probably already the case today.

The problem with bitcoin today is that the price is too volatile. Bitcoin proponents believe that can change with time and increasing adoption.

Do you have a source for your first statement?

I explained the first statement in the rest of the comment. I don't think I understand what you're asking for. Or maybe you're referring to the second statement?

I was asking for what systems currently in use can support that transaction rate. Based on my research no current crypto system comes remotely close to being able to handle the TPS needed.

You can have transactions denominated in crypto using conventional database technology.

This happens when people buy crypto using PayPal or Cash App or Robinhood, and at least thousands of times a second worldwide on crypto exchanges.

More generally, there is nothing stopping anyone from making a "PayPal of crypto" or a "Zelle of crypto."

In my mind, this is no way defeats the purpose of bitcoin. Bitcoin is like a Euro but for the whole world (which would never be politically achievable), plus cannot be manipulated (in terms of supply and interest rates) by a central bank (I think a huge plus, but obviously this is controversial). The point of bitcoin is not to be able to do illegal things on a blockchain.

Personally, I don't care about the other (i.e. non-bitcoin) cryptocurrencies. There's some interesting tech there that could change the world, but defi and smart contracts are addressing totally different things than bitcoin is.

There aren't a lot of projects that surpass Visa's TPS speed of 1700. The one legitimate contender that I can think of is Solana with TPS of ~50K transactions. The problem, however, is that it's still fairly centralized.

It's not a problem. We need a centralized, reversible system for payments.

Bitcoin SV

Iota can support the TPS. And transactions are free.

How garbage like Bitcoin is still popular blows my mind. $10 for a single transaction?

You bring up a good point about private services suddenly being able to cut people off from banking.

But if governments had that power what might happen?

It would be subject to a lot more scrutiny and due process?

I'm not sure how to figure out which situation results in more scrutiny and due process. I can buy that private corporations are under-policed, but I'm not sure the government would police itself either. Maybe the best is a kind of adversarial relationship between the public and private entities? Anyone know of compelling studies on what ultimately is best practice for compliance?

> I'm not sure the government would police itself either

One would assume that if the law was intended that everyone can have a bank account, then ultimately one would be able to appeal through the courts. Which are not perfect, but are a hell of a lot better than a company just being able to make it's own decision without having to justify it.

Of course, you could have a governmental setup without this aim. And you could regulate the private market. But generally speaking governmental organisations are held to higher standards and have less incentive to be non-compliant.

> But generally speaking governmental organisations are held to higher standards and have less incentive to be non-compliant

Citation needed. I’ve seen precisely the opposite. What’s needed is external pressure to be a good actor. The courts can do that to a government - in a country with very strong institutions. With a decent number of competing banks and a strong regulator, you can get very far

> One would assume that if the law was intended that everyone can have a bank account, then ultimately one would be able to appeal through the courts

Maybe we should first socialize the legal industry, such that suing the government is actually a realistic option for the common person who, at present, cannot afford to hire lawyers for something like that.

> I'm not sure the government would police itself either

Has it ever?

There's clearly _some_ push-and-shove that happens some of the time, officials get fired for ethics violations, laws get changed, politicians lose re-election. I don't think it's worthwhile to be reductive, there's got to be a quantitative way to compare how different compliance schemes tend to fare.

And political wrangling. And moral panics. And "national emergencies". And just about every other political abuse you can imagine.

That's without getting into the weeds of how well they would do at it implementation or how much it would cost.

Government could just do all the farming and manufacturing and food distribution also. Probably not very well and people would be much worse off and the system would be abused by those in power. Same concepts apply to this.

Single responsibility principal, as much as possible, is an efficient idea.

Government's job is to regulate. If there are problems with the current system that is largely a failure of regulation.

Then people could choose. The choice cuts both ways by providing a pragmatic path for government market constraint as an alternative to the cat and mouse games of exquisitely intricate regulations.

The government already has that power - there are lists of people that banks aren't allowed to do business with, because the government says so.

Not nearly to the extent directly controlling all transactions would give them. Not even close.

What you are talking about is things like sanctioning foreign firms or individuals. Yes, the IRS could also come after your bank accounts but it takes some work and isn't suitable for mass population control.

This is and that's unacceptable.

Governments have that power already. Various AML legislation can make any high street bank to not only block your account without reason util you prove your innocence, you can't even withdraw any of your money in cash. It happened to me in the UK, my account blocked with no reason for weeks until I summited all documentation. I was a foreign student at the time, almost destroyed me, no money for rent etc.

In any case, it's a orthogonal issue, government power vs democratic accountability, the highly regulated private banking system certainly does not protect you against it, they will do whatever the government asks of them as long as they can maintain their key rent extraction monopolies.

If there were government bank accounts, there wouldn't be instances of banks closing accounts for people's politics. The government bank would have to issue accounts for everyone because of first amendment protections

I think we should put the TSA in charge of the payments system.

Indeed. The “banking should be public infrastructure” never make the connection with their comments about Guantanamo and the TSA.

“We don’t need a warrant to see your banking transactions since the government itself provides the service”.

You know who had this? The USSR. This is about ending private banking. It's as bad as an idea as communism.

I want the end of private banking for your average deposit accounts [1]. Commercial banks don't make money off the accounts unless they can charge extortionate fees (overdrafts) [2], and credit/debit interchange is going down drastically when Fed instant payments roll out in 2023 (they are showcasing functional apps/use cases internally in the next few months, and are on schedule for their go live date). Government is accountable to its citizens, commercial banks to their shareholders. The logical conclusion is to offer deposit accounts and instant payments to all as a utility, and support infrastructure to allow other institutions (private banks, fintechs, etc) to extend credit.

But to equate public good deposit accounts, simple rows in a database tracking fiat, with communism is grossly disingenuous. Shall I defend the US Post Office, Social Security, and Medicare (other wildly successful public goods with high approval ratings) against being painted as "communism" as well? These are fundamental components and public goods of a developed society, and financial infrastructure falls into such a category (as you cannot live without it, and if you attempt to, you are going to learn how expensive and hard it is to be unbanked/underbanked).

[1] https://www.google.com/search?q=fedaccounts

[2] https://bam.kalzumeus.com/archive/

You have to understand that banks make the money they lend. Banks do not lend against reserves.

https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...

Giving this control to the government is a bad idea and will lead to the solviet-zation of the banking industry.

I am familiar with fractional reserve banking. Banks can obtain capital through other mechanisms than deposit accounts (CDs, bonds, etc) to enable their lending operations (mortgage debt, credit card debt, and auto loans are already securitized on the bond market, for example) and profit off of the (hopefully properly risk managed) spread. Commercial banks are not entitled to the deposits of citizens, nor should citizens have their financial lives beholden to commercial banks rent seeking off of their deposit accounts and cashflow. To your point about "giving this control to government", they already have it; they are the ones who set reserve requirements and oversee commercial banks (by way of the Fed and the OCC). Wells Fargo, Chase, and Bank of America are what soviet run banks would look like; wide spread abuses without sufficient repercussions to disincentivize reoccurrences (Wells [1]) and poor service for customers with the spoils funneled to the top (JPMC and BoA).

[1] https://www.yahoo.com/now/wells-fargo-scandals-the-complete-...

When’s the last time you heard of anyone setting up a CD ladder? 1995?

Sounds roughly the same time a checking account earned interest? My point was that banks have other avenues of obtaining operating capital for lending operations.

I think you need to come up with a more compelling point against this than "the USSR had it".

You know who had public transport? The USSR. Public transport is as bad as an idea as communism.

suddenly, current state of public transport in the US makes sense

I suspect you’re joking but I think there’s a good argument to be had for now allowing the government to have any influence in transportation.

Annoyingly, it had better public transit than the majority of the US does!

No. Someone needs to come up with a compelling reason to change our practices first.

Isn't sorry state of banking in US compared to pretty much everywhere in the world a compelling reason?

Oh well, there goes any chance of getting district heating this lifetime

USSR Communism also had a fire department - should we get rid of that as well?

Argue on the merits of something, not because a county had it or didn't.

Denmark has privatised most of their fire departments interestingly enough

If the USSR has things the USA didn't we should be very careful about adopting those things if it increases state power. It was a tyranny afterall

Lack of private banking is pretty minor aspect. Comparing to, say, having de-facto scrip instead of proper currency.

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