FedNow? Let’s make it FedNever.
On July 20th 2023, the Federal Reserve released the first phase in the rollout of its new FedNow instant payment platform. FedNow is advertised as an “instant payment infrastructure” that would “allow financial institutions of every size across the U.S. to provide safe and efficient instant payment services”. Eventually using this system, individuals will be able to pay bills or make payments to others through their bank app. All of these payments would be instantly validated by the Federal Reserve.
It is important to note that while the Federal Reserve is not a direct branch of the government, it is an extension of federal power. Therefore, the idea of the proper role of government still applies. That role is to protect its citizens. To do so, does the federal government need to directly manage your bank account? Do they need to verify when or how you pay your bills? Do they need to have access to how you split a check at a restaurant?
Through later phases of the FedNow service, the Federal Reserve will gain the ability to do all of the above. While the American banking system has always had federal regulation and oversight, this oversight has always been so that the banks don’t fail, leaving Americans without their money. But now, with the FedNow program, the Federal Reserve will be able to oversee and validate the everyday payments of ordinary people.
The FedNow website explains the pros of this new platform as being “safe and efficient,” providing “greater financial flexibility,” and helping banks “remain competitive” with private companies. However, are all of those worth having the federal government validate where your money goes? Not to mention, why do federal institutions need to incentivize economic competition? The government ought to leave this job to entrepreneurs and private companies.
In private payment systems like Venmo, the payment is debited or credited through a request from Venmo to either the bank or card that an individual adds to their account. There is no government authorization needed. Additionally, systems like Venmo have better incentives because if people do not trust them or want the services they provide, the business will go bankrupt.
The FedNow service has none of these incentives because it was developed by the federal government. They are not bound by the same rules of supply and demand. Instead, they could hypothetically funnel endless amounts of taxpayer money to the FedNow project. Not to mention, when has a program that provides the federal government more insight into the lives of citizens been instituted, then later repealed?
Maintaining liberty in this country involves maintaining our property rights, and that’s not just about your house or your car. The right to your hard-earned money is part of that too. The only person that should have access and control over your money, is you. Not the federal government.