Tuesday, October 4, 2016

Federal Credit Receipt (FCR)

A plan to retire the national debt & turn it into a spendable asset

Summary
The national debt is voluntarily placed into custody at the US Treasury and a local committee is created to decide how to spend that money for the benefit of the economy.

A “Federal Credit Receipt” (FCR) represents the Treasury bond obligation, after it is freed from all encumbrances and registered at the Treasury Department.  A “Credit Review Commission” (CRC) is created by the State legislature to decide how that money is disbursed.

This is a plan to distribute the monetary authority that has centralized in DC and NYC.  It delegates monetary power to the States while retaining Federal oversight.  Existing markets remain intact and an outlet is provided to retire the debt.  The national debt can be negotiated and its income-stream swapped (debt-to-equity swap), reducing the tax liability while respecting the obligation.

The national debt can be retired in an orderly and voluntary manner while distributing up to $1 trillion in spendable assets to each State.  Federal government obligations and credit are maintained.  As the $19 trillion becomes spendable by the States, the Federal budget and deficit can be reduced.

Goals
Retire the national debt safely and voluntarily.
Maintain the full faith and credit of the United States Government.
Re-build the infrastructure and economy.
Provide up to $1 Trillion in spendable assets to all 50 States.
Support the military's need for financing and provide currency-defense.

Problems
All money originates in Washington DC, forcing the States to ask for money from Congress.  DC frequently places strings on that money without legal jurisdiction or authority.  The primary fee source of NYC’s capital market is the daily rollover of the expiring debt.

Unless State taxes have pooled pockets of money within the State, all new money is requested through either DC or NYC.

The budget of the United States is financed through tax revenue and debt.  The ratio is about 1/3 new debt and 2/3 tax revenue.  The debt payments are interest-only with up to a 30 year balloon.  The debt-owners are in a powerful position because they own the future revenue stream of the tax payers.

Existing debt-owners are selling their T-bonds at their sole discretion and purchasing other assets denominated in USD.  The military requires a stable source of financing, so Treasuries cannot be negotiated.  Selling debt for USD is an uncontrolled source of inflation and is a threat to the currency.

For example, China selling bonds for USD and purchasing assets is a risk that the United States should not be willing to accept.  China can be allowed to swap bonds for other assets as determined by the State legislature.

Solution
1. A “Federal Credit Receipt” (FCR) is created by the US Treasury to represent the obligation of the Treasury bonds, notes, and bills.  The FCR is created when the debt obligation becomes unencumbered and separated from the markets.  The FCR is effectively a Treasury bond with "clear title" and in the custody of the US Treasury.

The FCR expires in 1 year.  If the FCR has not been redeemed for another asset within that time, the US Treasury can re-issue a 30 year bond to satisfy the obligation.

2. To process the FCR's creation, a new division at the US Treasury is created, called a “Credit Assurance Bureau” (CAB).  The CAB processes each debt instrument, ensures it is not being used as collateral, removes the interest rate obligation, and verifies its ownership.  The CAB maintains the records of the FCR, records its rightful owner, and holds the debt obligation in custody of the US Treasury.

3. Redemption of the FCR is performed by a multi-jurisdictional Commission as delegated by the State legislature.  An example might be a “Credit Review Commission” (CRC) created by the Texas state legislature as inclusive of representatives from the US Treasury, the Federal Reserve Dallas branch, Texas State Treasury, and County and/or City government agencies.  The legislation should specify that all redemptions must be "for the benefit of the local economy".  The CRC is comprised of many different people in different jurisdictions and they collectively decide how the income-stream is swapped on the obligation.  Due to the public nature of the national debt, decisions must go through committee, rather than individual control by the owner of the debt.

Pilot program
The Social Security Administration turns in some Bonds to the US Treasury for an FCR.  Texas' CRC decides to redeem that FCR for ownership in a Texas Stock Market in San Antonio.  SSA receives an income-producing asset, the debt obligation is retired, and Texas' economy is improved through more efficient capital distribution.

This also prepares Texas as a potential financial center for processing $200 Trillion in world-wide debt instruments.  A “Credit Receipt” would be a more generalized version of the FCR described above.

About me
Andrew B. Brown has a degree in Accounting from UT Austin, 20+ years of IT and executive experience including VP of a software company, managed the IT department of a Medicaid healthcare plan in Arizona, and most recently worked at Morgan Stanley as a lead software architect.  Mr. Brown has also managed ad valorem taxes for Bank One's REO department, originated mortgage loans for sale to Wall Street, and has 10+ years of professional trading experience while holding SEC Series 7, 63, 55 licenses.


The above is a brief overview and I'd like the opportunity to explore the details of how this can work to fix the US economy and rebuild its infrastructure.  As the legislation covers more than one jurisdiction, it could be summarized as the "Robin Hood legislation", as it places monetary decisions in the hands of the local population.

Andrew B. Brown
(512) 947-8282
andrewbb@gmail.com

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