The purpose of the hearing was to explore solutions to the difficulties of distributing stimulus benefits to low-income individuals and small businesses that lacked bank accounts during the economic shutdown created by the COVID-19 pandemic.
“The coronavirus crisis has highlighted critical shortcomings in the U.S. system of money and payments,” Ricks testified, noting that the only alternative for distributing badly needed stimulus payments to millions of Americans was paper checks because many low-income individuals and small businesses do not have bank accounts. Ricks proposed that the government offer “FedAccounts” through the Federal Reserve Bank, using the U.S. Post Office locations as “branches,” to give low-income individuals and businesses access to banking services often otherwise unavailable to them through commercial banks. “Banks have little incentive to service low-balance accounts because it is typically unprofitable to do so,” Ricks testified. “Bank branch locations are less prevalent in low-income communities and their house of operation are inconvenient for many prospective users.”
Ricks is a co-author, with John Crawford and Lev Menand, of Central Banking for All: A Public Option for Bank Accounts, published in June 2018 by The Great Democracy Initiative, which lays out their proposal for giving the general public—individuals, businesses and institutions—the option to have a bank account at the federal reserve.
In his testimony, Giancarlo urged task force members to “renovate long-neglected yet critical payment and financial infrastructure that is becoming increasingly outdated.” He proposed the implementation of a new form of digital currency issued by the U.S. central bank. “This type of ‘digital dollar’ would be a new, additional format for U.S. currency,” he said. “It would be a digital bearer instrument that has the same legal status as the dollars in one’s purse, but on a smart phone. It would operate alongside existing forms of money, would be primarily distributed through the existing two-tiered architecture of commercial banks and regulated money transmitters and would be recorded on new transactional infrastructure, potentially informed by distributed ledger technology.”
“The pandemic-induced crisis should be a call to action,” Giancarlo said. He is now a senior counsel at Willkie Farr & Gallagher.