David R. Kotok, October 6, 2024

(The following was first published on The Kotok Report website and via LISTSERV. For details, visit https://kotokreport.com/.)

A rule of thumb is that when politics gets inserted into the management of your money, be very careful and watch the money.   

We’ve seen that with ETFs like ACVF or ESGU or HKND or MAGA or PRAY or STRV or YALL, which have various alleged political agendas incorporated into their investment policies.  And we’ve observed the remarkable and volatile trading in the stock DJT.   I am not recommending nor endorsing any of these securities.  Readers may research them and their price action and decide for themselves.

Now we have a new twist of political action to get you to change your money management.  The disinformationistas are busy with political conspiracy theories about FedNow. Here’s a sample headline: “Biden to Launch “FedNOW” [Move Your Money Now].”  I have seen this headline and the entire accompanying message distributed to me from 4 different sources.   The text is the same in each message so there is a clear linkage among and between the sources.

IMO, these solicitations are preying on made-up fears or are trying to manipulate people into revealing personal information or trying to sell them a financial product or investment. Frequently, I see some gold-related product being offered.

Here’s what I know about FedNow and the Federal Reserve.

 I interviewed Fed Governor Chris Waller about FedNow before it was launched. This was at a public forum in the auditorium of the University of South Florida, Sarasota-Manatee campus, at a publicly attended conference. Governor Waller carefully explained how the launching of FedNow, a planned expansion of the Fed’s payment system, is simply a payments method, nothing else. He noted carefully how it was optional for users and how it built upon the existing Fed payments systems that larger enterprises are already using.  It is an additive feature.  If a person wants to continue to use VENMO, there is nothing restricting them from doing so.

So the scare tactics by purveyors of alternate financial products may induce someone to become their customer, but the claim of a hidden conspiracy is simply “fake news.”

The Federal Reserve operates an extraordinary payments system. Think about it. When the Twin Towers fell on 9/11 and crushed part of the NY Fed’s operations by rendering the area toxic, there were no payments were missed. The redundant systems operated. No real estate settlement in California was held up for a payments system failure on 9/12. No payroll was missed in Indiana because of failure of payments on 9/13. One might argue that the payments system operations by the Fed after 9/11 could be listed among the items confirming the Fed’s finest hours.  An attack on the financial center of the United States happened and not a single payment was missed.

Think about the disruption taking place right now in the six states suffering from the results of Hurricane Helene. People lack water or electricity or food or flood insurance or physical and medical support. The death toll is rising.  But there are no reports of failures in the payment systems. Note that a great part of the hurricane damage is in the Atlanta Fed Regional District, and the complete continuity of operations under this severe constraint demonstrates how wrong the fearmongers are.  What is missing is a huge supporting acknowledgment of the diligence by the folks in the Atlanta Fed and in the Fed’s system as they keep the payments flowing without any interruption.

The letter from Senator Fetterman and the response from Fed Governor Barr is linked here for anyone to read: https://www.fetterman.senate.gov/wp-content/uploads/2024/09/Sen-Fetterman-Letter-to-VC-Michael-Barr-9-26-2024.pdf. It is wrong for the fearmongers to use it as the basis to make the specious claims they are making. I’m quite confident that the information sought will be provided and is being accumulated right now. When someone uses this letter and its response as a reason to launch an attack on the Fed for politically motivated purposes, they are clearly misleading the recipient of their messaging. Do they commit a criminal fraud? I don’t know. That is a lawyer’s question.

In my interview, I asked Governor Waller about the plan to roll out FedNow. He was careful to explain that the Fed is proceeding slowly and carefully to make sure the payments system operated by the Fed will be flawless.

Here’s my view: I use the Fed’s payments systems regularly and have no fear of any conspiracy. IMO, it is the finest and most trusted payment system in the world. It is one of the many reasons the US dollar is the world’s reserve currency.

In our country, investors have the right to make smart choices, and they have the right to make dumb ones. And they have the right to lose money by listening to disinformationistas. We must all and each decide that for ourselves.

I’m not about to succumb to some politically motivated falsehood. What you do is up to you.