Community banks

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Establishment of 4,000 Community Banks --
(a) Each bank will be jointly be owned by stockholders (15.4%) and the community (84.6%)
(b) The stockholders will get the FIRST profits until they reach a 6% return on their capital investment.
(c) The community will get the rest of the profits (84.6%) in the form of spending on community needs

This plan provides for the establishment of 4,000 Community banks (Bank) -- one in each community area of about 75,000 people.
Each Bank will be given a State Charter that will spell out, in some detail, what that Bank will be doing. For the most part, at the
beginning of this program all Banks will focus on placing 4% / 30-year mortgages on single-family, owner-occupied homes wherein
the owners have put down 20% of the purchase price as a down payment and have sufficient verified income such that the mortgage
payment will not exceed a to-be determined percentage of that verified income (probably between 20 and 30%).
All levels of government (see #5 below) will be involved in this plan in a very simple arrangement that will thereby serve to
naturally provide the checks and balances that are inherent in the Constitution.
Those checks and balances are missing from our existing banking system that is essentially run by the Federal Reserve System
that is outside any of the branches of government established by the Constitution.
Participants in the new Money and Banking system and what they will do:
(a) Legislative Branch of the Federal Government: Will pass laws telling how the money and banking system will operate
(b) Executive Branch of the Federal Government: Will manage the money and banking system in accordance with laws
passed by Congress.
(c) The Federal Reserve System: Will be put into the Executive Branch of the Federal Government and which will work
in concert with the Treasury Department of the Executive Branch and renamed "The United States Central Bank". If the
Federal Reserve System or any individual bank does not want to operate in this way -- it can liquidate its assets by trading
them for Government bonds -- dollar for dollar.
(d) The 50 States: Will, in contractual agreements with Local Goverments, set the terms of the charters which will specify,
for each bank, which specific duties the Community Banks will perform and the rules under which the banks will operate.
(e) Local Governments: Will manage the Community Banks with government employees who will work only for the banks.
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ASSUMPTIONS
Banks will be extremely narrow -- no deposits will be accepted. That will cut overhead to an absolute minimum.
There are 50 million owner-occupied homes in the country.
There are 300 million people in the country.
20 million homes will be covered by these 4% mortgage loans.
There will be 4,000 banks -- one for every community-area of 75,000 people.
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FOR EACH BANK
The loans will cover only owner-occupied homes.
Owners must have a 20% down payment. That money can come from money suppllied by private citizens or charities that will
hold second mortgages on the homes involved.
Mortgage payments must not exceed 20 % of family income from all sources.
The average loan on each home will be $100,000.
Each Bank will issue and hold 5,000 mortgages. A total of $500 million / Bank.
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BANK CAPITALIZATION (estimated)
Assume $50 million capital for each bank. This can come from any source, preferably local people. Investors
will be given a 6% return (dividend) on their investment. That will result in a dividend payout of $3 million / year. That
will reduce bank profit to $16.5 million / year. If the $50 million can't be raised easily, the money can be advanced
by the Central Bank and paid back at the rate of 6% / year
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BANK INCOME (estimated)
INCOME PER LOAN -- For each Bank, there will be a Bank income of $4,000 / year on mortgage income per home.
TOTAL INCOME PER BANK -- Each bankâs mortgage income will therefore be $20 million / year. (5,000 mortgages --
each returning $4,000 / year).
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BANK EXPENSE (estimated)
Each Bank will operate with 4 employees.
Bank payroll will average $80,000 / year per employee. Maximum amount per employee -- $100,000. Minimum -- $60,000
Total payroll wil be $320,000 / bank / year. (#19 times #20)
Insurance, overhead and whatever / employee will be 50% of pay. That will add to $160,000 / bank / year.
Floor space will be 400 square feet / bank. Can be in any existing government facility.
Rent, utilities and overhead will be $12 / per square foot / year or $5,000 / bank / year.
Total expenses / bank / year will be:
(a) Employees -- $320,000 (from #21) + $160,000 (from #22) or $480,000 total.
(b) Space -- $5,000 / year (from #24)
(c) Total -- $485,000 / year -- adding (a) & (b) -- round to $500,000
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BANK PROFIT
Profit / bank / year --
(a) Income -- $20 million (from #18), minus
(b) Expenses -- $1/2 million (from # 25c)
(c) Total gross profit -- $19.5 million / bank. That is 33% on invested capital of $50 million.
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DISTRIBUTION OF EACH BANK'S PROFIT OF $19.5 MILLION
$3 million to stockholders -- 15.4% (from 26c)
$16.5 million to community -- 84.6% (total income minus dividend to stockholders)
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PROFIT FOR THE ENTIRE SYSTEM
Total profit for entire system of 4,000 banks -- $78 billion / year -- (4,000 times $19.5 million)
That is $78 billion / year income total for all 20 million homes.
That profit can be spent by the community for any general common good spelled out in the Bank's Charter.