After hearings devoted to careful scrutiny of Kelsonian concepts and program reforms,13 the Senate and House Banking Committees should enact legislation designed to:

(1) Establish a public or quasi-public Capital Credit Reinsurance Corporation (or encourage private insurance companies to perform this function) to insure banks, insurance companies, and other lenders who finance loans to Capital Homestead Accounts (CHAs) and similar credit mechanisms, such as the ESOP, ISOP, CSOP and CIC. (This would be similar to the way the Federal Housing Agency insures mortgages on home financing but without making the government the insurer of last resort.)

(2) Amend Section 13 of the Federal Reserve Act to mandate that the Federal Reserve Board and Federal Reserve Banks increase the money supply responsively in ways that enable banks and other qualified lenders to make "qualified" Capital Homesteading loans on feasible (i.e., self-liquidating) projects by discounting the loan paper at a discount rate reflecting real Fed costs (i.e., "pure credit" rates that exclude any inflation premium), pursuant to regulations to be adopted by the Federal Reserve System. The Fed might also require as a condition of eligibility that such loans be insured by capital credit insurers and, for more security, that the insurers pool their risks with a capital credit reinsurance facility.

(3) Establish a counterpart of Fannie Mae and Freddie Mac to set national lending standards and insurance criteria for Capital Homesteading loans, with the power to package loans made by qualified financial institutions for discounting with the Federal Reserve System.14

(4) Remove the power that the Federal Reserve now has to change directly the quantity of money in circulation through purchase and sale of government securities via the Open Market Committee, thus preventing future monetization of government deficits and forcing government into the competitive market to fund government debt. It should be noted that the new money added for Capital Homesteading would substitute dollar-for-dollar with the reduction in open market purchases of government debt paper.

(5) Eliminate the power of the Federal Reserve to control growth of the economy by raising and lowering interest rates, thereby allowing all interest costs above the lender’s "cost of money" under the two-tiered interest rate system to be set entirely by competitive market forces.

In effect, these new policies would amount to launching and promoting a counter-inflationary alternative to today’s exclusionary and wealth-concentrating monetary policy. With new consumer power linked directly to the productiveness of new productive assets, the economy would grow at the full extent of its human and nonhuman capacity instead of being artificially constrained by the Federal Reserve System.

In contrast to conventional investment finance, which has systematically perpetuated monopolistic access to the ownership of new productive capital while limiting the economic participation of 95% of U.S. households to their technologically vulnerable labor inputs, ESOP and other Capital Homesteading financing technologies provide a more rational alternative for raising the consumer power of American workers on a direct and individual basis, without violating the overall economy’s laws of supply and demand and as a trade-off to unjustified wage increases or perpetual income transfer schemes.

Part 8