One of the most aggressive—and worrisome—central bank digital currency models is a proposal from law professors Morgan Ricks and John Crawford and lawyer and former regulator Lev Menand that the Fed provide direct banking “FedAccounts” to consumers and businesses. It’s intended to improve payments efficiency and reduce the number of unbanked consumers. The direct CBDC model has appeal in being in some respects technologically simpler.
Since its 1913 creation, the Fed has relentlessly amassed more power as the central bank conducting monetary policy, as the paramount financial-system regulator, and as a payments operator. On its own prerogative, it decided to launch a real-time interbank-payments system called FedNow to compete with private-sector providers that it regulates, such as The Clearing House.
But now the FedAccounts proposed by Ricks, Crawford, and Menand would be state retail banking on a massive scale. Economist Larry White estimated an account-based digital dollar would require the Fed to increase its workforce twenty-fold.
Fed Chairman Jerome Powell thus far has been circumspect about the Fed launching a digital dollar, directly or through banks. Testifying on Feb. 11 to the House Financial Services Committee, Powell said “it’s very much incumbent on us and other central banks to understand the costs