THE BANKS WROTE THIS LETTER IN 1980 — ONLY THE PRODUCT CHANGED

Eight banking trade groups wrote to Senators Thune and Schumer on September 14 asking Congress to tighten the limits on stablecoin rewards. One of the eight is the Independent Community Bankers of America.

On January 28, 1980, the Independent Bankers Association of America, a predecessor of today’s ICBA, wrote to Senator Alan Cranston about money market mutual funds. The letter sits at pages 463 to 466 of the Senate Banking subcommittee’s hearing record, where Omid Malekan (@malekanoms) found it this week and posted the pages.

Read what it says. The funds were pulling money out of “time and savings deposits of individuals in commercial banks.” The outflow was causing “an impairment of their ability to meet the credit needs of their communities.” Rural banks were struggling, and the group noted its membership was “heavily concentrated in the nation’s farm belt.” The funds were really transaction accounts wearing a different name, and they “should be governed by the same laws, rules and regulations.”

Swap money market fund for stablecoin and that is this week’s letter.

Here is how the first one ended. Sixty-three days later Congress passed a law that began phasing out Regulation Q, the rule capping what banks were allowed to pay their own depositors. The Federal Reserve’s own history of that law names money market funds as the reason savers had walked away. Congress did not restrain the competitor. It let the banks compete.

Money market funds hold trillions now. The banks are still here.

Credit where it is owed. Omid Malekan found the 1980 letter and posted the pages. We pulled the hearing record it sits in and the law that came sixty-three days after it.

At the time of this writing, bitcoin was $78,546 at 6:58 PM ET on Crypto.com.