BAHA'I BANK MISSION AND DESIGN
Design of the Baha'i Bank ("the Bank") follows from its mission:
1. Remove essentially all Baha'i community funds from secular banks. In the context of the worsening international financial crisis, a primary function of the Bank will be to convert essentially all liquid assets to gold and/or silver bullion and take physical possession.
The "funds" or "liquid assets" are all official Local, National and International Baha'i Funds, including the Continental and Regional Funds and all Baha'i Endowments, presently deposited in secular banks or other financial institutions, including stocks, bonds or other investment vehicles. Those who fail to implement Mission #1 risk loosing some or all of their savings, since these deposits all depend on the promise of the fiduciary institution and/or the government in its jurisdiction and promises may be, and most likely will be, broken. Gold in hand is nobody's promise.
In sum, this mission component preserves and protects wealth in all of the Baha'i Funds and Endowments, and should be implemented first and with great haste for Baha'i deposits in secular institutions providing the greatest returns or yield. Why? This seems to be opposite to common sense. Answer: deposits or other financial assets returning higher interest rates or yield are precisely the most risky, the most likely to experience loss of principal. Convert all those to gold first -- immediately.
2. Reserves held by the Bank in Gold or Silver Bullion. Ideally, the Bank and its branches should each own a secure vault to hold its bullion "deposits". If branches of the Bank are located in close proximity to bullion dealers, 100 oz and 400 oz "good delivery" gold bars or 1000 oz silver bars may be exchanged back and forth with paper currency as required with very small transaction fees.
In addition to the continuing devaluation of all fiat (paper) currencies (dollar, euro, yen, etc) by massive money printing by misguided governments, any fiat currency may be unexpectedly devalued substantially over-night by government decree. Briefly, those, including Baha'i Funds and Endowments, holding paper-denominated assets loose that wealth on a daily basis, and possibly most or all of it in phase II of the Greater Depression. Meanwhile, those, including the Bank, holding Shoghi Effendi's universal currency, will, by most accounts, experience an increase in wealth.
3. A private bank model suffices for mission items #1 and #2. Initially, the customers of the Bank are only the Baha'i Funds and Endowments and the associated Baha'i institutions -- e.g., Local and National Spiritual Assemblies, The UHJ, the Continental Boards of Counsellors, and so forth. This arrangement is often called a "private bank". In other words, at present, the Bank is not for individuals to open checking accounts and get other financial services -- as in a commercial bank.
Since it is of utmost importance to create and launch the Bank as soon as possible, let us defer the question of other accounts, say, for individual Counselors or other appointed units or committees of the Baha'i Administration.
In this private bank model, transfers from one Administrative unit (or Fund) to another is easy, centralized and requires no transfer fees paid to third-party financial institutions.
4. The Bank may utilize credit union concepts. Mission example:
Given that the Bank's own assets cannot earn much interest in the price-controlled, near-zero interest rate environment of the doomed-to-fail secular banking world, literally burning before our eyes because their so-called assets too often consist of money lent to others that will never be repaid;The welcome results are many:
given that some Local or National Baha'i communities (or other Bank "member" units) may have received loans from secular banks for, say, a Baha'i center;
given that such long-term loans, as in mortgages, require the debtor Baha'i community to pay relatively high rates of interest;
these financial apples may be juggled as follows:
First, the Bank may lend to the debtor Baha'i community (an account holder or "member" of the Bank) the full amount of the remaining principal and interest owed to the secular bank, which will be used to pay off that loan and remove the secular bank from the financial picture of that Baha'i community or unit.
Second, the debtor community or unit now will pay a lower interest rate for its new long-term loan from the Bank.
(1) Secular banks which may have unfavorable terms for the Baha'i community are removed from the equation, thereby reducing risk.5. Member accounts at the Bank may be denominated in oz of gold or silver, as stipulated when the account is opened. While this mission component no doubt may require a bit of thought, it would insulate the Bank and its member customers (Baha'i communities and Funds, etc) from paper currency fluctuations, to which they are presently subject (without the agency of the Bank) and to an ever increasing extent.
(2) The debtor community experiences significant savings, by paying a reduced interest rate to the Bank, as one of its members.
(3) The Bank gains an income stream to cover its expenses and hopefully to increase its capital.
That is, according to Mission #2 above, all member deposits are converted to precious metal bullion, leaving only enough fiat currency reserves (mostly received via deposits) needed for operational expenses in the coming three to six months, or as determined by the Bank management. These fiat currency reserves are mostly the paper money currency of the Bank branch host countries.
An account holder may have two accounts, one each in gold or silver oz. units and may in essence convert from one to the other as determined by procedures of the Bank.
6. Non-profit, religious, charitable mission of the Bank. Thus far, the Bank is seen along the lines of a private bank / credit union model, concepts which are familiar in law and custom on all continents. The central non-profit and religious works aspects of its mission are also well-known and accepted ideas around the world.
The present point is that the exact definitions of banking, and laws or customs governing same, can vary widely across countries and continents. Therefore, the non-profit private bank and credit union for religious works model proposed herein may be most amenable to satisfactory and rapid implementation. For one thing, it avoids a host of detailed laws and licensing requirements applicable to financial institutions taking deposits from the general public, which is beyond the scope and mission of the Bank.
The official name of the Bank will be chosen in accordance with this Mission item.
7. The Bank will not lease its bullion reserves. Perhaps needless to say, in accordance with the Bank's mission of preserving and protecting the wealth (savings) of the Baha'i world community, it will forgo any earnings (surplus) from leasing its gold or silver bullion reserves to third-parties.
8. The Bank will offer services and charge fees to generate surplus (profit). A comprehensive treatment of this mission item is beyond the scope of this introductory proposal. However, as examples, some ideas might include:
(1) Money Transfers. An international inter-bank wire transfer of less than $10,000 USD may cost about $25 USD or more. While management of the Bank will establish procedures, there is definitely room to earn "surplus" in such transactions, in a sort of Western Union business model. Money transferred from branch A to branch B of the Bank might involve a purchase of gold at branch A and a sale of gold at branch B to pay the recipient. For such transfers, the sender and recipient may be members of the Bank or non-members in the public. There may be a fiat currency exchange involved as well, whether or not a gold intermediary step in the process is employed. For all such currency exchanges, bid and ask prices apply to the currency units (gold or paper money), and therein lies a surplus for the service provided by the Bank.This sampling is only a taste of a number of possible "profit centers" for the Bank, as it develops.
(2) Small fees to issue check books to Bank account holders. Initially, before the Bank establishes its own check clearing systems, this function could be sub-contracted to a third-party. To avoid fraud or theft of Baha'i funds, the Bank may require, where feasible, that checks drawing on member deposits (or credit line) be signed by two parties, preferably without family relationship.
(3) Purchase/Sale of Gold/Silver Coins or Bullion. Since branches of the Bank already have secure quarters to handle real money -- i.e., gold and silver, this activity is a natural option to earn a surplus and help pay for the investment of establishing branches of the Bank. Again, in bullion purchase/sale transactions, bid and ask prices apply and surplus (profit) may be obtained by the bid-ask spread.
(4) Letters of Credit. In a potentially dramatic demonstration of Baha'i thought on the universal currency and international trade, branch A could issue letters of credit for an entity ordering goods, payable to the producer or shipper of said goods at branch B of the Bank, and of course, earn fees in the process. Said letters of credit could be denominated in oz of gold or silver, to remove fiat currency risk for the buyer, seller and the Bank itself, in providing this service.
9. The Bank will distribute its bullion reserves among its branches across continents. The management of the Bank will determine the distribution over time based on its mission to preserve and protect wealth of the Baha'i community. This is the "don't place all your eggs in one basket" principle. If war, natural disaster, social unrest, etc, affect some areas geographically, hopefully, if the distribution of bullion assets is done well, possible losses will be minimized.
What Baha'is often call the "old world order" is being rolled up at a faster pace than many observers may have expected. This is producing a highly unstable situation where things can change suddenly chaos-theory-style rather than gradually.
Thus, this proposal for the Bank might be regarded as a high priority project for the Baha'i Administration. It encompasses protecting the purchasing power of current Baha'i liquid assets by removing them from secular financial institutions as soon as possible and liquidating all debts of Baha'i communities to secular banks, as described in mission item #4.
How long does it take to do a withdrawal, use the cash proceeds to purchase bullion and take physical delivery. Heck, that can be done in one day. At least, it would not take weeks or months to do so. Birth of the Bank as proposed requires only a little understanding of current events, the will to safeguard Baha'i assets, and at first, a lap-top to set up the member accounts. Let's get going.
© 2010 James J Keene