MANCHESTER, NH -- In a bold and visionary move, Presidential Candidate Steve Laffey and renowned economist Larry Kotlikoff have jointly called for a transformative shift in the United States banking system, urging the adoption of limited purpose banking. This groundbreaking proposal aims to overhaul the financial landscape, enhance stability, and protect the interests of American citizens.
Limited purpose banking is an innovative framework that seeks to address the inherent risks and vulnerabilities present in the current banking system. By fundamentally restructuring the way banks operate, this proposed system aims to safeguard against financial crises and put the interests of the public at the forefront.
Laffey, a graduate of Harvard Business School and the former President of Morgan Keegan, says, “The leverage in our banking system, combined with disastrous regulation over the past many years has led to our banks failing every 15 years or so.”
Kotlikoff, Laffey’s Senior Economic Advisor, added, “Let’s make the banks fail proof by eliminating their two evil twins—leverage and opacity! Traditional banking is built to fail. It's failed every fifteen years since our nation's founding. Right on time—fifteen years after the great financial crisis—it's failing again. When the banking system fails, the economy tanks and taxpayers are forced to cover bankers' losses.”
Together, Laffey and Kotlikoff propose a new paradigm in which banks operate exclusively as custodians of funds, ensuring their primary function is to protect the deposits of individuals and businesses. In this model, banks would be prohibited from engaging in speculative activities or risky investments, significantly mitigating the potential for systemic risk and reducing the likelihood of financial crises.
Kotlikoff added, “It's time to stop heads Wall Street wins, tails taxpayers lose. It's time to stop bankers from gambling with other people's money. We need to make the banks less powerful. We need the financial system to stop blowing up the economy every 15 years. We need limited purpose banking.”
The benefits of limited purpose banking are multifold. Not only would it enhance financial stability, but it would also foster greater transparency, accountability, and public confidence in the banking sector. By insulating the broader economy from the excessive risks often associated with traditional banking practices, limited purpose banking would provide a strong foundation for sustainable economic growth and prosperity.
As a Presidential candidate, Laffey has pledged to prioritize the implementation of limited purpose banking as a critical aspect of his economic policy agenda. “I have been a proponent of Limited Purpose Banking since I read Larry Kotlikoff's book, Jimmy Stewart is Dead, in 2011," said Laffey.
Kotlikoff emphasizes the transformative potential of limited purpose banking, asserting that it represents a monumental step toward ensuring financial stability for future generations. “If elected, Steve Laffey will implement limited purpose banking, ending bank failures forever. Limited purpose banking is not radical. It's sensible,” Kotlikoff added, “That's why it's been mentioned so often by the Financial Times, other top media, and leading central bankers.”
Laffey and Kotlikoff are available for interviews.
SOURCE: Laffey 2024
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