Ellen Brown Original

FDR Knew Exactly How to Solve Today’s Unemployment Crisis

A self-funding national infrastructure bank modeled on the “American System” of Alexander Hamilton, Abraham Lincoln, and Franklin D. Roosevelt would help solve not one but two of the country’s biggest problems.
Franklin Delano Roosevelt. [Eli Christman / CC BY 2.0]

By Ellen Brown / Original to ScheerPost

Millions of Americans have joined the ranks of the unemployed, and government relief checks and savings are running out; meanwhile, the country still needs trillions of dollars in infrastructure. Putting the unemployed to work on those infrastructure projects seems an obvious solution, especially given that the $600 or $700 stimulus checks Congress is planning on issuing will do little to address the growing crisis. Various plans for solving the infrastructure crisis involving public-private partnerships have been proposed, but they’ll invariably result in private investors reaping the profits while the public bears the costs and liabilities. We have relied for too long on private, often global, capital, while the Chinese run circles around us building infrastructure with credit simply created on the books of their government-owned banks.

Earlier publicly-owned U.S. national banks and U.S. Treasuries pulled off similar feats, using what Sen. Henry Clay, U.S. statesman from 1806 to 1852, named the “American System” – funding national production simply with “sovereign” money and credit. They included the First (1791-1811) and Second (1816-1836) Banks of the United States, President Lincoln’s federal treasury and banking system, and President Franklin Roosevelt’s Reconstruction Finance Corporation (RFC) (1932-1957). Chester Morrill, former Secretary of the Board of Governors of the Federal Reserve, wrote of the RFC:

[I]t became apparent almost immediately, to many Congressmen and Senators, that here was a device which would enable them to provide for activities that they favored for which government funds would be required, but without any apparent increase in appropriations. . . . [T]here need be no more appropriations and its activities could be enlarged indefinitely, as they were, almost to fantastic proportions. [emphasis added] 

Even the Federal Reserve with its “quantitative easing” cannot fund infrastructure without driving up federal expenditures or debt, at least without changes to the Federal Reserve Act. The Fed is not allowed to spend money directly into the economy or to lend directly to Congress. It must go through the private banking system and its “primary dealers.” The Fed can create and pay only with “reserves” credited to the reserve accounts of banks. These reserves are a completely separate system from the deposits circulating in the real producer/consumer economy; and those deposits are chiefly created by banks when they make loans. (See the Bank of England’s 2014 quarterly report here.) New liquidity gets into the real economy when banks make loans to local businesses and individuals; and in risky environments like that today, banks are not lending adequately even with massive reserves on their books. 

A publicly-owned national infrastructure bank, on the other hand, would be mandated to lend into the real economy; and if the loans were of the “self funding” sort characterizing most infrastructure projects (generating fees to pay off the loans), they would be repaid, canceling out the debt by which the money was created. That is how China built 12,000 miles of high-speed rail in a decade: credit created on the books of government-owned banks was advanced to pay for workers and materials, and the loans were repaid with profits from passenger fees. 

Unlike the QE pumped into financial markets, which creates asset bubbles in stocks and housing, this sort of public credit mechanism is not inflationary. Credit money advanced for productive purposes balances the circulating money supply with new goods and services in the real economy. Supply and demand rise together, keeping prices stable. China increased its money supply by nearly 1800% over 24 years (from 1996 to 2020) without driving up price inflation, by increasing GDP in step with the money supply.   

HR 6422, The National Infrastructure Bank Act of 2020

A promising new bill for a national infrastructure bank modeled on the RFC and the American System, H.R. 6422, was filed by Rep. Danny Davis, D-Ill., in March. The National Infrastructure Bank of 2020 (NIB) is projected to create $4 trillion or more in bank credit money to rebuild the nation’s rusting bridges, roads, and power grid; relieve traffic congestion; and provide clean air and water, new schools and affordable housing. It will do this while generating up to 25 million union jobs paying union-level wages. The bill projects a net profit to the government of $80 billion per year, which can be used to cover infrastructure needs that are not self-funding (broken pipes, aging sewers, potholes in roads, etc.). The bill also provides for substantial investment in “disadvantage communities,” those defined by persistent poverty. 

The NIB is designed to be a true depository bank, giving it the perks of those institutions for leverage and liquidity, including the ability to borrow at the Fed’s discount window without penalty at 0.25% interest (almost interest-free). According to Alphecca Muttardy, a former macroeconomist for the International Monetary Fund and chief economist on the 2020 NIB team, the NIB will create the $4 trillion it lends simply as deposits on its books, as the Bank of England attests all depository banks do. For liquidity to cover withdrawals, the NIB can either borrow from the Fed at 0.25% or issue and sell bonds. 

Modeled on its American System predecessors, the NIB will be capitalized with existing federal government debt. According to the summary on the NIB Coalition website:

The NIB would be capitalized by purchasing up to $500 billion in existing Treasury bonds held by the private sector (e.g., in pension and other savings funds), in exchange for an equivalent in shares of preferred [non-voting] stock in the NIB. The exchange would take place via a sales contract with the NIB/Federal Government that guarantees a preferred stock dividend of 2% more than private-holders currently earn on their Treasuries. The contract would form a binding obligation to provide the incremental 2%, or about $10 billion per year, from the Budget. While temporarily appearing as mandatory spending under the Budget, the $10 billion per year would ultimately be returned as a dividend paid to government, from the NIB’s earnings stream. 

Since the federal government will be paying the interest on the bonds, the NIB needs to come up with only the 2% dividend to entice investors. The proposal is to make infrastructure loans at a very modest 2%, substantially lower than the rates now available to the state and local governments that create most of the nation’s infrastructure. At a 10% capital requirement, the bonds can capitalize ten times their value in loans. The return will thus be 20% on a 2% dividend outlay from the NIB, for a net return on investment of 18% less operating costs. The U.S. Treasury will also be asked to deposit Treasury bonds with the bank as an “on-call” subscriber. 

The American System: Sovereign Money and Credit

U.S. precedents for funding internal improvements with “sovereign credit” – credit issued by the national government rather than borrowed from the private banking system – go back to the American colonists’ paper scrip, colonial Pennsylvania’s “land bank”, and the First U.S. Bank of Alexander Hamilton, the first U.S. Treasury Secretary. Hamilton proposed to achieve the constitutional ideal of “promoting the general welfare” by nurturing the country’s fledgling industries with federal subsidies for roads, canals, and other internal improvements; protective measures such as tariffs; and easy credit provided through a national bank. Production and the money to finance it would all be kept “in house,” without incurring debt to foreign financiers. The national bank would promote a single currency, making trade easier, and would issue loans in the form of “sovereign credit.” ’

Senator Henry Clay called this model the “American System” to distinguish it from the “British System” that left the market to the “invisible hand” of “free trade,” allowing big monopolies to gobble up small entrepreneurs, and foreign bankers and industrialists to exploit the country’s labor and materials. After the charter for the First US Bank expired in 1811, Congress created the Second Bank of the United States in 1816 on the American System model

In 1836, Pres. Andrew Jackson shut down the Second U.S. Bank due to perceived corruption, leaving the country with no national currency and precipitating a recession. “Wildcat” banks issued their own banknotes – promissory notes allegedly backed by gold. But the banks often lacked the gold necessary to redeem the notes, and the era was beset with bank runs and banking crises.

Abraham Lincoln’s economic advisor was Henry Carey, the son of Matthew Carey, a well-known printer and publisher who had been tutored by Benjamin Franklin and had tutored Henry Clay. Henry Carey proposed creating an independent national currency that was non-exportable, one that would remain at home to do the country’s own work. He advocated a currency founded on “national credit,” something he defined as “a national system based entirely on the credit of the government with the people, not liable to interference from abroad.” It would simply be a paper unit of account that tallied work performed and goods delivered. 

On that model, in 1862 Abraham Lincoln issued U.S. Notes or Greenbacks directly from the U.S. Treasury, allowing Lincoln’s government not only to avoid an exorbitant debt to British bankers and win the Civil War, but to fund major economic development, including tying the country together with the transcontinental railroad – an investment that actually turned a profit for the government.

After Lincoln was assassinated in 1865, the Greenback program was discontinued; but Lincoln’s government also passed the National Bank Act of 1863, supplemented by the National Bank Act of 1864. Originally known as the National Currency Act, its stated purpose was to stabilize the banking system by eradicating the problem of notes issued by multiple banks circulating at the same time. A single banker-issued national currency was created through chartered national banks, which could issue notes backed by the U.S. Treasury in a quantity proportional to the bank’s level of capital (cash and federal bonds) deposited with the Comptroller of the Currency.

From Roosevelt’s Reconstruction Finance Corporation (1932-57) to HR 6422

The American president dealing with an economic situation most closely resembling that today, however, was Franklin D. Roosevelt. America’s 32nd president resolved massive unemployment and infrastructure problems by greatly expanding the Reconstruction Finance Corporation (RFC) set up by his predecessor Herbert Hoover. The RFC was a remarkable publicly-owned credit machine that allowed the government to finance the New Deal and World War II without turning to Congress or the taxpayers for appropriations. The RFC was not called an infrastructure bank and was not even a bank, but it served the same basic functions. It was continually enlarged and modified by Pres. Roosevelt to meet the crisis of the times until it became America’s largest corporation and the world’s largest financial organization. Its semi-independent status let it work quickly, allowing New Deal agencies to be financed as the need arose. According to Encyclopedia.com:

[T]he RFC—by far the most influential of New Deal agencies—was an institution designed to save capitalism from the ravages of the Great Depression. Through the RFC, Roosevelt and the New Deal handed over $10 billion to tens of thousands of private businesses, keeping them afloat when they would otherwise have gone under …. 

A similar arrangement could save local economies from the ravages of the global shutdowns today.

The Banking Acts of 1932 provided the RFC with capital stock of $500 million and the authority to extend credit up to $1.5 billion (subsequently increased several times). The initial capital came from a stock sale to the U.S. Treasury. With those modest resources, from 1932 to 1957 the RFC loaned or invested more than $40 billion. A small part of this came from its initial capitalization. The rest was financed with bonds sold to the Treasury, some of which were then sold to the public. The RFC ended up borrowing a total of $51.3 billion from the Treasury and $3.1 billion from the public.

Thus the Treasury was the lender, not the borrower, in this arrangement. As the self-funding loans were repaid, so were the bonds that were sold to the Treasury, leaving the RFC with a net profit. The RFC was the lender for thousands of infrastructure and small business projects that revitalized the economy, and these loans produced a total net income of over $690 million on the RFC’s “normal” lending functions (omitting such things as extraordinary grants for wartime). The RFC financed roads, bridges, dams, post offices, universities, electrical power, mortgages, farms, and much more–all while generating income for the government.

HR 6422 proposes to mimic this feat. The National Infrastructure Bank of 2020 can rebuild crumbling infrastructure across America, pushing up long-term growth, not only without driving up taxes or the federal debt, but without hyperinflating the money supply or generating financial asset bubbles. The NIB has growing support across the country from labor leaders, elected officials, and grassroots organizations. It can generate real wealth in the form of upgraded infrastructure and increased employment as well as federal and local taxes and GDP, paying for itself several times over without additional outlays from the federal government. With official unemployment at nearly double what it was a year ago and an economic crisis unlike the U.S. has seen in nearly a century, the NIB can trigger the sort of “economic miracle” the country desperately needs.  

Ellen Brown
Ellen Brown

Ellen Brown is a regular contributor to ScheerPost. She is an attorney, founder of the Public Banking Institute, and author of thirteen books including the best-selling Web of Debt. Her latest book is Banking on the People: Democratizing Money in the Digital Age and her 400+ blog articles are at EllenBrown.com.

34 comments

    1. Considering his history of cozying up to the powers-that-be in banking and finance, Biden would have nothing to do with it as well. Which attitude is reversed by good people educating Biden before he trims the necessities of what must be funded the dumb evil old-fashioned way by a Congress equally uneducated to the model described above by Ellen Brown.

    1. WARNING: Varoufakis is the snake who sold Greece down the river to the German banks now afflicting every Greek into the far-distant future.

      1. That is a falsehood and smear – Varoufakis sought exactly the opposite, but he was sandbagged and the German banks were intransigent.

    1. Who’s against it? The Federal Reserve, which is neither federal nor a reserve. It is a conglomeration of the biggest and most profitable banks which by design masquerade as a federal agency to avoid looking like what they are, banks, profiting wildly on every dollar created by the government, even charging the Treasury a percentage of every dollar “The Fed” orders the govt to print. Any vehicle, especially the sort of banks detailed in this article, and small community banks within post offices to serve the locality with small personal loans at low interest and loans to build small businesses which do wonders within the local economy, can replace the international banking cabal that is The Fed.

      1. The Creature from Jekyll Island covers the scam nicely. I assume you’ve read it.

  1. It’s about time someone of quality wrote this down for everyone to get. China has ONE bank a nasty snap at our Bank One. they have lifted their nation and economy up from Serfdom and abject poverty in 2-3 decades and we ostracized them after Reagan et al demanded we move all our manufacturing to China basically to destroy our Union Labor movement.
    plus, the two stories herein about Lincoln and his “unknown” greatest thing. probably: since slavery was really only converted into share cropping
    & jim crow. and the “greenback” has worked since then.
    The other think herein is to refute the oft=stated myth that it was only WWII that saved us fro the great depression and false idea that makes us tend to excuse eternal wars for economic purposes.
    thanks, Ellen Brown.

    1. That was Clinton and the year was 1995. And we even have the memo from Hillary’s buddies at Walmart (she was on the board) to their suppliers telling them to move their factories to China. That’s when the exodus started.

    2. Jimmy G,
      Yes, Ms Ellen Brown writes as a person of quality in her articles and books on the subject she knows very well, which are well-researched and not speculative, in my opinion. And I like what Ms Brown said about the Chinese in her opening paragraph. It’s certainly not a “people’s paradise,” but neither is the USA, but yet they managed to lift hundreds of millions of their citizens out of poverty and have been making great inroads in building infrastructure on the African continent, whereas the European imperialists plundered Africa for over 500 years.

      I was no fan of the anti-union Reagan and his right-wing regime, but I don’t recall reading or hearing him demand we move all our manufacturing to China to destroy our Labor Union movement, and I’m a retired trade-unionist. FDR was the last President to do anything for Labor. When the Democrats controlled the House and the Senate for about 40 years, not one member, to my knowledge, ever authored a bill to abolish the anti-union (anti-worker) Taft-Hartly Act of 1947 or 48. Not once!

      On moving our manufacturing to China for cheap labor, lax or little or no environmental concerns and cheap property to set up shop, it was the Nixon/Kissinger Regime who “broke bread” with the Chinese in 1972.

      On slavery, one southern plantation owner was quoted as saying (and this is from my memory of reading it in a Labor Studies textbook 25 years ago) that “Why should I pay a white man X amount of money to work for me when I can buy a negro slave and make him worker harder, and if he doesn’t, put the whip to his back! All I have to do is provide him with room and board.” That’s the nature of the insatiable desire of capitalism.

  2. Hi, Ellen, I realze that you’re not old enough to have lived when FDR was in office, but I have, though I didn’t get old enough to sign up in his CCC.
    I detect only verity in what you espose. Remember you at Radford a few years ago. You’ve grown in wisdom and stature. Why hasn’t Trump been able to
    stimulate employment and work of this manner?

    1. Thanks Nelson. Actually I was born the year FDR died! But I don’t usually repeat that. My parents definitely remembered. My dad got his master’s in engineering on the GI Bill and they bought a house with a GI loan. I think this NIB 6422 bill has a good chance of passing; circumstances now are similar to the Great Depression. But there’s a lot more divisiveness now in the country and in Congress.

  3. I was hanging out with the grain traders on LaSalle Street who were as smart as I was estimating huge construction projects and they humbled me with their ability to make commitments to deliver millions of bushels of a variety of grains at specific days in the distant future just like I was bidding on delivering thousands of cubic yards of concrete formed and cured in the right shape also years in the future . I had written a payroll program after learning HPL from the instruction manual on my computer. The invisible hands of the market that I knew were quite visible and Eddy’s usually enclosed a beer bottle and Carl’s a rock’s glass of scotch. Tom was there at Yee Wall and controlled thousands of elevators full of every kind of grain they traded and George with Burlington RR who could fetch or deliver grain from anywhere to anywhere at any date in the future for a guaranteed price. Robert Bork and Milton Friedman invented supply side economics which was incomprehensible but got Nobel prizes so they must be better than what we had which had worked fine with 50% corporate profit tax and 90% for high individual income. My friends were all fired and computers which imposed totalitarian prices dictated by monopolies to ruin little suppliers were installed and they had no qualms about selling naked shorts which was a felony but who can jail a computer while my friends were careful to not do that shit.

    1. Milton Friedman wanted Salvador Allende, removed from Chile in the early 70’s because he nationalized the mines for the Chilean people. The cooper industry in the U.S. sent their lobbyists to D.C. to have Trick Dick involve the CIA in the coup, replacing the Democratically elected fascist, Pinochet in charge of the hen house. You know the rest.

      1. There was a computer error on my post above. On the last line, it should have read:

        “democratically elected president, and putting the fascist dictator, Pinochet, in charge of the hen house. You know the rest.”

  4. FDR would have loved a market driven gold market where personal monetary gold could have been used by the free market for debt-free transactions and managing the trade value of the circulating medium. Alas, it was not to be because there was no real-time market capabilities at the time. He did what he did on the basis of limited capabilities.

    The above was realized at Bretton Woods and Bretton Woods became the beginning of the end of the fixed price peg on gold. Gold’s management and monetization process was then given over to the marketplace where the consumer now has the stage.

  5. Here is what I said to encourage my FB friends to read your article:
    PUT ON YOUR THINKING CAP. THERE ARE GREAT IDEAS HERE TO CONSIDER.
    Ellen Brown’s brilliant analysis touched on an observation I made today on another post, that we seemed to have been smarter 90 years ago when we took a country in the Depression and going into World War II and somehow used money we didn’t have to become the world’s largest economy. We see China doing it now.
    On another day, I have noted how poorly we plan and execute everything these days, as compared to Lincoln starting land grant colleges and building a transcontinental railroad DURING THE CIVIL WAR.
    Ms. Brown’s essay ties all of this together. Too bad she hasn’t figured out how to turn this into a mindless tweet to get through to the powers that be!

    1. Arthur, my sentiments as well on Ms Brown’s essay. You stated it well!

      The American people have become zombie-like, and are programmed to think that anything socialized is an evil thing which leads to enslavement. If Ellen, or anyone else, or some group or whatever could ever make our fellow citizens see that cooperation, and the “one for all, all for one” doctrine works, that might be the greatest achievement in our lifetime. Methinks.

      The late Andre Vlitchek, a humane and spiritual man if I ever met one, and I did having the honor of meeting and chatting with Andre, traveled extensively in China and marveled at the progress they were making in so many areas. They have a state-controlled style capitalism, unlike the U.S. and the Chinese leaders plan for the future, rather than their quarterly statements. Well, it’s been paying off for them as the United States deteriorates, except for the War Machine which both Republicans and Democrats strongly support, justifying our policy of inflicting death, destruction, misery and suffering on any country who can’t defend themselves against the “World’s Only Super-Bully,” if they don’t abide by our dictates.

  6. This is what Larouche et al have been pushing for decades.
    FDR did say some noteworthy things about the need to let the worlds nations develop and not just be exploited.
    I dont dispute that it would be an improvement for the US today which is dependent on an evil oligarchy.
    However from a wider perspective FDR and European socialdemocrats and german and Italian fascism all helped the same oligarchy to run the weaponsindustry, the oligarchy anticipating the profitable war period.
    Profitable for the oligarchy and since it meant that all the rivals were hit bigtime it gave the US public some respite after WW2.
    An opportunity the US public failed to make good use of.
    They just continued being led by that same oligarchy which was at the root of that evil era.
    The reason for the failure probably is the educational system and the medias role. All in tune with Britains imperial designs being represented in the US by the partners in the angloamerican establishment.
    Their aim is to maintain peoples ignorance and the left side of politics is unfortunately not very enthusiastic about developing peoples individual capacity for independent thought.
    They along with the oligarchy support collectivist thinking of a superficial character and do not want people to think independently since that might make them critical of both sides: the left type of politics as well as the oligarchic type which is surrepticiously protected by the liberals.

    Under all the different types of regimes mentioned above strikes could be avoided which was good for warproduction and motivation for participating in concomittant national efforts.

    The US was instrumental in building up fascism in Europe and although this wasnt FDRs fault it was behind the rise of the US to a dominant position.
    Hitler wrote a fan letter to Madison Grant leader of the eugenics society, saying his book was Hitlers bible.
    And the british were even worse although it is being completely blanked out by the oligarchic vassals among academic historians..
    So the angloamerican establishment was on both sides for maximum profit.
    The wellbeing caused by the new deal was a part of the necessary preparations and the conspiracy to promote fascism employing Smedley Butler was probably just a trick to pretend to be opposed just like they pretended to be opposed to the FED in 1913 so the guillible would be provoked to support it.

    1. In 1926 Mussolini nationalized the banks because privateer banksters were voting absentee stocks. The banksters were swinging the stock market and taking sordid gain.

      When Hitler came to power, the Reichsbank had already came under Chancellorship control. The Dawe’s plan (Dawe’s was an American) had been adjusted to return Reichsbank to state control, due to the destruction of the hyperinflation.

      So, both fascism and national socialism were a response to predatory finance capitalism. Corporations, especially privateer banking corporations were brought to heel. That is what fascism is, the control of corporate excess, to prevent sordid gain.

      The U.S. was not instrumental in building up fascism, it was “finance international” as it emanated from London and Wall Street. American corporations that had stock interests and investments wanted their returns, and fascism guaranteed corporate returns, provided they were not excessive and damaging to the body politic. Hitler even went so far as to abolish the revolving door between government and corporations, where government workers could not own certain kinds of stock.

      LaRouche et al, is curiously blind when it comes to the American System and how it evolved. Peshine Smith carried the American System to Japan, where the Imperial Japanese used it. Frederick List carried it to Germany, where it was used by the Kaiser, and later resurrected by Hitler and his economic advisors.

  7. While I appreciate the intent of the proposal, it seems to me that that what is actually accomplished is to hide the federal debt by moving it off-balance sheet (just as the banks do with their special vehicles), turn infrastructure into a profit-making venture for investors, and also guarantee an extra 2% on dividends. Surely a simpler formulation would provide infrastructure at building cost with no mark-ups in line with the analysis of Michael Hudson:

    Michael Hudson is Professor of Economics at the University of Missouri, Kansas City and author The Bubble and Beyond (2012).

    counterpunch.org/2015/10/05

    “The objective of the classical economists was to bring prices in line with value to prevent a free ride, to prevent monopolies, to prevent an absentee landlord class so as to free society from the legacy of feudalism …..

    ***

    To prevent such price gouging…., Europeans kept the most important natural monopolies in the public domain: the post office, the BBC and other state broadcasting companies, roads and basic transportation, as well as early national airlines. European governments prevented monopoly rent by providing basic infrastructure services at cost, or even at subsidized prices or freely in the case of roads. The guiding idea is for public infrastructure – which you should think of as a factor of production along with labor and capital – was to lower the cost of living and doing business.”

  8. Terry H. from Chicago who was on the front lines nails the “supply side” economics scam. Combined with “just in time” ordering and NAFTA like trade deals, our economy was packaged with a pretty bow to a handful of global monopolies, Federal and state banks are an important component in clawing back power and sovereignty
    to the people and to our nation.

  9. I had often thought that the Social Security Trust Fund could earn a return handling first time home loans & student loans .
    However someone would see to it, to destroy it

  10. Excellent proposal, but with one very significant omission:

    The infrastructure and jobs programs need to be integrated with the Green New Deal and a federal land use program to assure that they don’t promote more greenhouse gas emissions, mindless economic growth, and status quo engineering approach.

  11. Ellen, would you mind commenting about on-call subscriber and what that means? It seems like an important detail. Also, I assumed the return to preferred stock holders was 2% OVER existing T bond rate, where it may just be 2% flat rate. details.. details

    1. NIB legal construct (corporation) is formed.
    2. $500B in T Bills from private sector is purchased by NIB. TBills are necessary to capitalize the corporation.
    a. Purchase is a swap/exchange for equivalent amount in stock shares of NIB corporation. Stock shares are preferred, meaning non-voting.
    i. Swap/Exchange for TBills comes with a sales contract.
    1. Sales Contract is a guarantee from government where NIB preferred stock dividend is 2% over the former TBll return.
    a. Two percent guaranteed return (over TBill interest rate) is paid out of the Treasury budget.
    i. This budget outlay looks like $2B in spending per year, but the outlay is returned to Treasury with future via NIB dividends.
    3. NIB is now a fully capitalized banking corporation and can hypothecate new loans into existence.
    a. NIB has a 10% capitalization ratio, therefore the TBill/bonds held by the bank, can create 10x their value in loans. 500B in capitalization becomes 5000B is loan expansion.
    i. Loans are channeled toward city and state customers, to build out infrastructure. Loans are priced with an interest rate of 2%, substantially lower than prevailing commercial banks in the private sector.

    1. Return to NIB (and Treasury) will be 2% x 10 (loan expansion ratio) = 20%.
    a. Return is 20% – 2% dividend. NIB operating costs are subtracted from the 18% return.

    b. NIB also becomes an on-call subscriber, where Treasury will be asked to deposit additional TBill/Bonds.

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