We, the undersigned, support the following principles governing financial reform and endorse immediate implementation of the Purple Financial Plan, also known as Limited Purpose Banking.
Principles of Financial Reform
- The goal of a financial system is intermediation, not gambling.
- The new system should be transparent and provide full disclosure.
- The new system should never collapse or put the economy at risk.
- The new system should not require government guarantees.
- The new system should entail limited regulation.
- The new system should improve financial intermediation.
Limited Purpose Banking
- Applies to all financial companies protected by limited liability. This includes incorporated commercial banks, investment banks, insurance companies, hedge funds, and private equity funds.
- All financial companies protected by limited liability must operate exclusively as mutual fund companies that market mutual funds.
- Mutual funds are not allowed to borrow and, thus, never fail.
- Mutual fund companies required to also issue cash mutual funds, which hold only cash.
- Cash mutual funds are used for the payment system.
- Cash mutual funds are backed to the buck.
- Mutual fund companies are not permitted to back money market or other non-cash mutual funds to the buck and can lose value.
- A single regulator - the Federal Financial Authority (FFA) -- hires private companies that work only for it.
- Companies working for FFA verify, appraise, rate, custody, and disclose, on the web and in real time, all securities held by mutual funds.
- Mutual funds buy and sell FFA-processed and disclosed securities at auction. This ensures that issuers of securities, be they households or firms, receive the highest price for their paper (borrow at the lowest rate).