Jimmy Stewart Is Dead: Ending the World's Ongoing Financial Plague with Limited Purpose Banking / Laurence J. Kotlikoff

Discover how the global financial plague is poised to return, and what can be done to stop it

This is not your father's financial system. Jimmy Stewart, the trustworthy, honest banker in the movie, It's a Wonderful Life, is dead. And so is his small-town bank, Bailey Savings & Loan. Instead, we're watching It's a Horrible Mess with Wall Street (aka the Vegas Strip) playing ever larger craps with our economy and our tax dollars.

This book, written by one of the world's most respected economist, describes in lively, humorous, simple, but also deadly serious terms the big con underlying the big game-the web of interconnected financial, political, and regulatory malfeasance that culminated in financial meltdown and brought us to our economic knees. But is also proposes a solution-Limited Purpose Banking, a straightforward and easily implemented plan to make Wall Street safe for Main Street.

• Outlines the first and only proposal to fundamentally fix our financial disaster for good
• Written by a leading economist whose insights on this topic are unparalleled
• Explains the tenets of the plan, such as the regained government control of the money supply and the new role of insurance companies

Jimmy Stewart Is Dead will fundamentally change the way you think about the economy, financial markets, and the government-sand even if you don't agree with Kotlikoff's conclusion, you'll find his analysis of the crisis and his simple solution a true economic eye-opener.

Amazon Exclusive: Q&A with Author Lawrence Kotlikoff

1. What is limited-purpose banking?
First I want to point out that Jimmy Stewart Is Dead is only partly about this proposal. It’s in large part a layman’s tour of the financial collapse conducted by an economist who can talk in plain English and is holds no bars. If you really want to understand what happened in fundamental economic terms, please read the book. And if you really want to know how to fix the problem, please read the book and then send it to your Senator or Congressman.

Limited Purpose Banking puts takes the multifaceted fraud out of our financial system by turning all banks, insurance companies, hedge funds, etc. into fully transparent mutual fund companies. Limited Purpose Banking also abolishes over 115 federal and state regulatory authorities and replaces them with the Federal Financial Authority, which verifies, fully and immediately discloses, and independently rates and appraises all securities held by the mutual funds.

In a nut shell, Limited Purpose Banking makes Wall Street safe for Main Street. Under Limited Purpose Banking we will never again experience financial collapse and contagion. The proposal is receiving significant attention by Mervyn King, Governor of the Bank of England, and other top policymakers throughout the world.

2. Another term that is mentioned a lot these days is narrow banking. What is the difference between narrow banking and LPB and why is LPB a better option?
Narrow Banking says that the monies invested in checking accounts and similar short-term deposits must be invested in very safe securities, like federal government Treasury bills. It lets the rest of the financial system do its own thing and tells that part of the system – “Boys and girls, you’re on your own.” If you borrow money to invest in fraudulent or simply risky securities and lose your shirts, we’re not going to bail you out. Well, this was tried in the case of Lehman’s failure and it blew up in the government’s face.

Limited Purpose Banking includes cash mutual funds, which are held strictly in cash. So one element of LPB is narrow banking. But LPB is much broader. It precludes any financial intermediary of any kind, which is protected by limited liability, from doing anything but marketing mutual funds and the mutual funds are themselves never leveraged. So the entire financial piping system is made safe, not just a few pipes that weren’t at much risk to begin with.

3. What are the advantages of implementing a system like limited-purpose banking and how will it differ from our current banking system?
We’ll never have another financial collapse. We’ll never see a run on banks ever again. We’ll never see insurance companies insuring the uninsurable. We’ll get rid of all the con jobs underlying the current financial system. There will be no more insider rating deals, liar loans, director sweetheart deals, bonuses which amount to corporate theft, bribing of Congress, and the list goes on. The financial plague will be cured, once can for all.

The biggest difference between what we now have and Limited Purpose Banking is we’ll have a financial system that’s honest and that we can trust. This will make all the difference in the world in getting the American economy back on its feet.

4. You’ve recently been referred to as Mervyn King’s (Bank of England) “Guru”. Do you anticipate that the UK might be more amenable to a proposal like LPB than the US? Why?
First, Mervyn King needs no guru, and I’m not his guru. He’s a brilliant economist and an outstanding public servant. I’ve learned a lot more from him over the years than he’s learned from me.

Many of the ideas contained in Limited Purpose Banking were being independently conceived and considered by other economists at the time the book appeared. This includes Mervyn King and other superb economists at the Bank of England.

Governor King, Alisdair Turner, and other top members of the British government are taking this plan very seriously. It’s very simple and if the UK adopts it, the U.S. is likely to follow.

But the U.S. may move first. If you look at who endorsed the book – former Treasury Secretary and Secretary of State George Shultz, former Senator Bill Bradley, former Secretary of Labor, Robert Reich, two former CEA chairmen (Michael Boskin and Murrar Weidenbaum), two former chief economists of the IMF (Simon Johnson and Ken Rogoff), a former chief economist of the SEC, a former deputy Comptroller General of the Currency, and … not to mention FIVE Nobel Laureates in Economics, you see that there is extremely widespread support for this plan in U.S. policy circles and academia. The endorsements are coming from all sides and ends of the political aisle.

5. What do you anticipate as the reaction by the banking industry to LPB?
If the banking industry is smart, they will realize this is the best way to go. The American public is extremely angry and is not up for business as usual. 15,000,000 people are unemployed and many other millions are underemployed or have dropped out of the labor force. Wall Street has destroyed the economy and millions of innocent economic lives. Wall Street did this by engaging in fraud – left, right, and center and then turning to the tax payer to pay for the havoc it created. These problems continue to this day. They need to be fixed fundamentally. The status quo seems safe, but as the book shows, it’s extremely risky. And because it is so risky, Wall Street will either need to be baby sat in a manner it won’t like or it can operate honestly under LPB. These are its only two options.

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