An Open Letter to the Federal Reserve

Dear Ben Bernanke and distinguished members of the Federal Reserve:

We are writing today to formally solicit your help in obtaining approvals to start a new bank holding company, Money Unlimited. We of course understand that the approval process for a new bank is typically done through the FDIC, but as the Federal Reserve plays a crucial role in our business plan, we hope that you can expedite the process.

First, let us assure you that we will start from day one as a very well capitalized institution, with no need to raise outside capital. While actual cash is on the lower end of the spectrum, we both own stock portfolios that we plan to use as collateral for our banking operations. Our current holdings include Berkshire Hathaway (NYSE: BRK-B  ) , Johnson & Johnson (NYSE: JNJ  ) , Procter & Gamble (NYSE: PG  ) , and Coca-Cola (NYSE: KO  ) .

For the purposes of this application, we are choosing to mark these assets to model rather than to market. Our basic assumptions include 7% U.S. GDP growth, 12% global GDP growth, a 4% U.S. unemployment rate, rising corporate profitability, U.S. debt repudiation, and the end of cloudy days.   

In addition, Matt owns a home in Las Vegas. Though this asset is currently considered "under water" based on market valuations, a house down the street just sold for slightly more than Zillow.com said it was worth. We extrapolated that gain into infinity and determined the housing bust is simply a figment of the media's imagination.

Now the good news: Without getting into the complexities, our models show our combined net worths at just over $1 billion, all of which we'll use as capital for Money Unlimited. We hired a 22-year-old right out of college who's pretty darn good with Excel. He assures us it's a conservative figure.

While neither of us has any "formal" banking experience, our time-tested business model more than compensates for this apparent shortfall. As with Goldman Sachs (NYSE: GS  ) , which was recently made a bank holding company, we have no plans to engage in actual banking operations such as deposit-taking and lending. That stuff just sounds hard. Regulators are always all, "You need to lend money to people who can pay you back." We'd rather just avoid that whole sticky situation altogether.

Instead, we're going to leverage our borrowings from the Federal Reserve to create a massive, money-spewing trading operation.

It's quite simple, really. We're going to borrow money from the Federal Reserve at 0%, then lend it back out to the U.S. Treasury at 3%. The Treasury can then use that money for fantastic programs like Cash for Clunkers. If we leverage our $1 billion asset base 20-to-1, we'll pull in $600 million in year one without breaking a sweat.

Because we want to do what's right for the economy, we plan to keep operating expenses to a bare minimum and limit our bonuses to $20 million each for the first five years. By plowing the remaining money back into the bank -- and, of course, leveraging it at 20-times -- we'll be able to grow like a weed. Assuming you folks at the Federal Reserve continue to do your part by lending money at 0%, we expect to clear $120 billion in assets in five years flat.

And don't worry about us. We understand that hard work and tangible economic contributions need to be rewarded, so in the sixth year of operation we both plan to take $500 million bonuses and use company money to buy ourselves private jets.

Money Unlimited will offer other significant benefits to the economy as well. We'll compete against banking organizations such as Goldman Sachs, JPMorgan Chase (NYSE: JPM  ) , and Citigroup (NYSE: C  ) , who are no doubt engaging in similar practices. (Have you seen their earnings?) Plus, we'll allow other banks to buy credit defaults swaps against us. As any financial professional worth his salt can tell you, this "increases liquidity" and helps small businesses. We can't tell you exactly how that works, but salesmen who wear shiny cuff links and talk really fast tell us it's true.

But helping the economy isn't all we're about. As Goldman Sachs' CEO Lloyd Blankfein recently put it, this is "God's work," and we certainly don't disagree with that.

Before long, the founders of Money Unlimited expect our trading operations will become so large that we will be considered "too big to fail." While some may consider this a concern, we disagree. There should be more competition among "too big to fail" institutions so that the risk of a Chernobyl-type catastrophe in our financial system is spread more broadly.

Thank you for your time and we look forward to your help obtaining a speedy approval for Money Unlimited.

Sincerely,
Matt Koppenheffer and Morgan Housel

Yes, people, this is satire, but you'd be surprised how accurate it is. In many ways, this is exactly how our banking system works these days. And while you can't invest in Money Unlimited (yet!), our fellow Fool Anand Chokkavelu recently shared a bank he thinks you need to buy.

Berkshire Hathaway is a Motley Fool Stock Advisor pick. Berkshire Hathaway and Coca-Cola are Motley Fool Inside Value recommendations. Johnson & Johnson, Coca-Cola, and Procter & Gamble are Motley Fool Income Investor picks. The Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Morgan Housel owns shares of Berkshire Hathaway, Procter & Gamble, and Johnson & Johnson. Fool contributor Matt Koppenheffer owns shares of Berkshire Hathaway, Johnson & Johnson, and Coca-Cola but of no othe company mentioned. The Fool's disclosure policy loves its gig at the Fool but is entertaining a very lucrative offer from an unnamed up-and-comer in the banking world.


Read/Post Comments (66) | Recommend This Article (355)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 20, 2009, at 1:43 PM, Counterparty wrote:

    Unfortunately all to accurate in some respects, but still very funny and great to read!

    One of the best blogs I've seen here on TMF.

  • Report this Comment On November 20, 2009, at 1:52 PM, theHedgehog wrote:

    I recced this for being sadly funny. Good job and shame on us.

  • Report this Comment On November 20, 2009, at 2:48 PM, PhulishMortal wrote:

    I regret that I have but one rec to give for my, er, your article.

    "And don't worry about us. We understand that hard work and tangible economic contributions need to be rewarded, so in the sixth year of operation we both plan to take $500 million bonuses and use company money to buy ourselves private jets." That's pure gold.

  • Report this Comment On November 20, 2009, at 4:21 PM, nessie42 wrote:

    Incredible. One of the greatest articles I've read in the past year. Simply magic.

  • Report this Comment On November 20, 2009, at 4:29 PM, TMFDiogenes wrote:

    Yes.

  • Report this Comment On November 20, 2009, at 4:31 PM, bajanalways wrote:

    Yuh know what? I really do hope the powers..er..Feds that be...do read this letter.

    Why didn't I think o' that?

  • Report this Comment On November 20, 2009, at 4:33 PM, dollarfor40cents wrote:

    Good one!

  • Report this Comment On November 20, 2009, at 4:39 PM, kedo76 wrote:

    Like Metallica once said..."Sad but true!" Speaking of which, we should bring back good bands like Metallica along with a sane approach to banking, er, bank holding. Win win. I bet Rage Against the Machine would have great songs about the stupidity of today's economic situation...

  • Report this Comment On November 20, 2009, at 4:41 PM, thisislabor wrote:

    a 22 year old out of college who is darn good with excel - yes! I love that comment.

  • Report this Comment On November 20, 2009, at 4:43 PM, nessie42 wrote:

    Did someone just equate bringing back Metallica to the banking industry? lol

  • Report this Comment On November 20, 2009, at 4:57 PM, PRITCHDOG wrote:

    Sounds like a solid inventment, when can we start buying shares. Good one.

  • Report this Comment On November 20, 2009, at 4:59 PM, foolishafterall wrote:

    That puts things in perspective. Nicely done.

  • Report this Comment On November 20, 2009, at 5:00 PM, lexga wrote:

    My 22 year old son is gaduating from college this year and his prospects look grim. Can he be your EXCEL man?

  • Report this Comment On November 20, 2009, at 5:02 PM, bretco wrote:

    A hoot and a half. Well Done,

    Still a sad commentary.

  • Report this Comment On November 20, 2009, at 5:18 PM, jc09058 wrote:

    While not discussed within the article, I would like to know when you plan to IPO? I'm sure there will be a few takers on this one. Why not, people still invest in Citi and et. al.

    ROFL

  • Report this Comment On November 20, 2009, at 5:18 PM, giciman wrote:

    Wow, I did not realize its that easy. It a sure way to cure poverty. Let any one open a bank with a leveraged business plan, borrow at 0% and lend at 3%. But why stop there, get some Visa and Master Charge cards out there at 20%, and % % the money rolls in... rolls in.. my god how the money rolls in! %%

  • Report this Comment On November 20, 2009, at 5:22 PM, TMFKopp wrote:

    @PRITCHDOG

    As soon as we get up and running we'll be more than happy to take investors' money. After all, we can add that to our equity, leverage it 20-times and make even more money for ourselves.

    I should, however, warn you that we won't give a hoot about our investors. I figure sometime around 2053 we'll have a board meeting to discuss dividends and my best guess is that the notion will be laughed out of the room.

    In the end, the investment returns for Money Unlimited will be the stuff of hopes and dreams rather than dollars and cents. The real money will go to me and Morgan.

    Matt

  • Report this Comment On November 20, 2009, at 5:24 PM, SissyTheClown wrote:

    The best tongue-in-cheek article I've read in a while. It's just too bad about the Fed's practices. I had such respect for Greenspan and Bernanke too. It seems like there are no honest people at the top any more.

  • Report this Comment On November 20, 2009, at 5:28 PM, jesse2159 wrote:

    I think that recent events in the Mob might make them eligible for TARP funds. Why, hardly a week goes by that you hear about some poor loanshark being indicted for charging customers very high interest rates and taking their businesses away from them if they fail to pay on time. Ok, so they may go a little over the top by sending Big Louie (AKA The Nose) to suggest a suitable repayment schedule. But, they do get results. As Al Capone once said "you can always get further with a kind word and a gun, then you can with just a kind word". Who can argue with that logic.

    Now, class, does anyone know of an institution that charges high rates for loans and takes your property if you don't pay? No, the IRS is a good suggestion, but, I'm looking for a business we all use every day.

  • Report this Comment On November 20, 2009, at 5:42 PM, bjw17 wrote:

    Where and when does all this end? Are we sleeping? No, we expect to be given competent information on our nightly news. Whut????

    Guys, very creative. Scary and all too true.

    By the way, have any of our major networks reported anything about the congressional pink slips?

  • Report this Comment On November 20, 2009, at 6:08 PM, TMFBomb wrote:

    Have you guys considered juicing your returns at virtually no risk? Instead of Treasuries, I've got these AAA-rated securities...

    Great stuff, guys!

    -Anand (TMFBomb)

  • Report this Comment On November 20, 2009, at 6:11 PM, DaretothREdux wrote:

    Very Funny! I know this guy who wrote a blog on November the 6th....that seems to be 14 days prior to this one....that oddly reminds me of this blog....

    http://caps.fool.com/Blogs/ViewPost.aspx?bpid=289114&t=0...

    ;-D

    He asks for no credit of course....

    Dare

  • Report this Comment On November 20, 2009, at 6:20 PM, TMFKopp wrote:

    @DaretothREdux

    Funny stuff... shows how great minds think alike. Maybe you should set up a competitive bank for Money Unlimited!

    Of course you were thinking small -- you gotta to take that original $1 billion and leverage it to the sky!

    @TMFBomb

    You know, we've heard about those AAA securities, but we're planning on sticking to Treasuries for our books.

    However, our business plan does include setting up a group that will buy subprime debt, chop it up, and sell it off as AAA. We're not going to actually hold onto any of it, but we think it'd be a great idea for you to buy it!

    Matt

  • Report this Comment On November 20, 2009, at 6:22 PM, gesheddc wrote:

    Ha, ha. The emperor has no clothes, (yet again.)

    Thank you, that was great.

  • Report this Comment On November 20, 2009, at 6:26 PM, DaretothREdux wrote:

    TMFKopp,

    I recced yours....did you rec mine?

    Hehe. Just kidding. But seriously.

    Dare

  • Report this Comment On November 20, 2009, at 6:35 PM, madhat007 wrote:

    That is the truth! The abuse is out of control just like the spending...What will we do?

    support Ron Paul audit the fed and then remove the 2nd mandate of the fed's control growth...then repeal glass Steagall...It was Clinton who sold us down the tubes by getting GS removed come on people.. write your congressmen and senators..better yet let's plan the next tea party in DC...come on fools ,how much more of the shananigans can we put up with?

  • Report this Comment On November 20, 2009, at 6:43 PM, TMFKopp wrote:

    @Dare

    Haha, thanks and done!

    Matt

  • Report this Comment On November 20, 2009, at 7:12 PM, ironyworks wrote:

    Hey;

    It's a better deal than we are getting presently!

    That's progress!

    We need a solvent for govt inanity.

  • Report this Comment On November 20, 2009, at 8:56 PM, bartjf wrote:

    Great business plan!

    Unfortunately these arrogant *&)(*&*^*^%&^% m0rons are not content to receive a fully leveraged guaranteed rate of return from (soon to be compromised) treasury investments w/ ZERO % interest expense.

    With all of this excess free money from our President and Congress they are takking on more and more risk to "Maximize Returns" . Because ....?

    I do not know! How is any of this type of absolute stupidity going to help us pay for the new programs, old programs or true stimulus? Please enlighten me.

    THank you.

    PS GREAT ARTICLE!

  • Report this Comment On November 20, 2009, at 9:00 PM, Julia1234 wrote:

    What are we going to do about this? Will kicking the congress all out in 2010 and 2012 even make a difference with this stuff being in the Fed Reserves hands? Where is this insanity coming from??!! It's might be time to start investing in batteries and fishing nets--just in case.

  • Report this Comment On November 20, 2009, at 9:20 PM, realitytest wrote:

    Cute! (*snort*) Cute!!

  • Report this Comment On November 20, 2009, at 11:00 PM, Gardnermiles wrote:

    So truthful yet so painful to everday Joe. The FED's aren't too smart and have virtually no conscience but I feel they may get the drift if they read this in one of their better moments. If the law would only make a full scale crack down on Fraud, Scams and Corruption which today runs rampant just consider all the money that could be loosened up and used for job creation, the infrastructure etc. CEO'S working county roads in jail attire. Wow what a picture.

  • Report this Comment On November 20, 2009, at 11:23 PM, delsuelo1 wrote:

    this article is hilarious! but a bit upsetting at the same time.

  • Report this Comment On November 21, 2009, at 12:40 AM, TMFTomGardner wrote:

    So Foolish it hurts. And, yeah, it really really hurts.

  • Report this Comment On November 21, 2009, at 9:44 AM, jomueller1 wrote:

    Thanks for the letter. It is one of the few that I share with friends.

    Sadly, we allow the government to work like that and make us foot the bill for their follies. How dumb are we?

    I love cynicism and sarcasm. That is nice for a laugh or inspiraton. But now it is also time to act. Please never vote for an incumbent or a lawyer or a financial business person. Use all the means you have to clean out the pile of $%^& in Washington.

  • Report this Comment On November 21, 2009, at 10:36 AM, leenapaivikki wrote:

    Yay! Right to the point. Funny - but sad. How did we ever get to this point with our financial business?!!

    A definitive share-with-friends-and-family article. Proud to be a Fool. Thank you Mat and Morgan!

  • Report this Comment On November 21, 2009, at 12:47 PM, Schlageter wrote:

    What an intelligent article! It is sad that such a satire reflects real world to the detail - so the real world we live in is just what?

  • Report this Comment On November 21, 2009, at 2:01 PM, mountain8 wrote:

    Wonderful commet but useless. Does anyone out there have the power, knowledge and 'want to' to do something with these arrogant as*****s? Organize for real.

  • Report this Comment On November 21, 2009, at 2:43 PM, nelpasa wrote:

    Capilalism ingenuity at its best!!! Great modus operandi!!

    Great article

  • Report this Comment On November 21, 2009, at 2:49 PM, F4Fjockky wrote:

    Great piece of writing. I hope you emailed it to every member of congress so they can see how stoooopid they seem to us, and to help them realize why their approval rating is down the drain. Is their goal to cure us of capitalism?

  • Report this Comment On November 21, 2009, at 6:15 PM, RichardFiory wrote:

    I really feel left out. While I don't have the assets to start a bank of my own, the idea is exactly where I want to go. What will I need to participate in this scheme in a smaller way. I don't want to go to jail or anything like that, just steal, er um, I mean move cash around. I have some experience with three card monte and some other... My real name wont appear, right?

  • Report this Comment On November 21, 2009, at 9:41 PM, 1sweet1 wrote:

    Thanks Morgan and Matt for a thoughtful article. The assumptions were sound, with one exception. Unemployment. I think we can conservatively expect unemployment to get to 2%.

    LynnChase tells of the only real antidote to the financial self-largesse. Ohio state sues the ratings agencies. Hit them big in the pocketbook. Other than that, we don't have a chance against the lobbyists.

  • Report this Comment On November 21, 2009, at 10:16 PM, JPG101 wrote:

    Can I start a franchise of your operation? I will work very hard at doing what you do and work for only a 10 million $ a year bonus. If you think this would drive down bonus I will accept 20 million if necessary.

  • Report this Comment On November 22, 2009, at 7:05 AM, BMFPitt wrote:

    Since I don't think Bernanke gets sarcasm, can I invest in this new venture when the Fed approves it?

  • Report this Comment On November 22, 2009, at 11:23 AM, slakk wrote:

    I'd better grow a beard and dig out a nice suit from the rack at the Salvation Army. I want in!

  • Report this Comment On November 22, 2009, at 1:06 PM, TMFScarletGray wrote:

    Awesome article!

  • Report this Comment On November 23, 2009, at 12:43 AM, XMFWhatsmyoption wrote:

    Matt and Morgan, this must be in the running for the best Foolish article ever.

  • Report this Comment On November 23, 2009, at 11:20 AM, miteycasey wrote:

    Articles like this shows how stupid the FED can be because this is exactly what the big banks are doing.

  • Report this Comment On November 23, 2009, at 11:20 AM, miteycasey wrote:

    Articles like this shows how stupid the FED can be because this is exactly what the big banks are doing.

  • Report this Comment On November 23, 2009, at 3:19 PM, jwxfiles wrote:

    Matt and Morgan,

    I, too, have some devalued assets and would like to serve as a senior vice president of your bank. Please let me know when I can start. I will, of course, expect a huge signing bonus and a guaranteed golden parachute worth multiple millions.

  • Report this Comment On November 23, 2009, at 8:01 PM, VegasMartin wrote:

    Genius article! Great comedic relief.

    http://www.ShootTheBears.com

  • Report this Comment On November 23, 2009, at 11:16 PM, u2nelson wrote:

    The big banks, and the Fed Res are one and the same, just check out who runs the banks and then later runs the Fed. And lets not forget that when the Fed loans money, that means they created money from thin air. This is legalized counterfeiting. Hey what does a counterfeit electronic dollar look like anyway?

  • Report this Comment On November 24, 2009, at 5:32 PM, Doccus wrote:

    e-bonds?

  • Report this Comment On November 24, 2009, at 5:33 PM, Doccus wrote:

    gov't e-bonds?

  • Report this Comment On November 27, 2009, at 9:44 AM, dudesama wrote:

    This is truly an "outperform" 5-stars article!

  • Report this Comment On November 27, 2009, at 11:38 AM, mcrose wrote:

    This would be a lot funnier if there weren't several thousand people sitting on their yachts and in their penthouses playing sad songs on $300,000 turn tables that double for <a href="http://online.wsj.com/article/SB123431293649170767.html"... huge middle finger to everyone who enters your home."</a>.

    They beat us up, they took our money, and have not even found the decency to say "thank you" now that we've paid them for the honor of being robbed.

    I'm getting by, but the country as a whole would be a lot better off if a group of enterprising people would gather up the pitch forks and shovel this giant inefficiency out of our financial system.

  • Report this Comment On November 27, 2009, at 3:23 PM, guyjeen wrote:

    I agree with u2nelson. The Fed does what it does to serve the big banks (aka themselves).

  • Report this Comment On November 27, 2009, at 11:33 PM, vinodchand wrote:

    Ouch!

    Someone hit the nail on the head here.

    Hope the people in power wake up and smell the coffee before they bring the whole system down on its knees.

  • Report this Comment On November 28, 2009, at 1:13 AM, jchere2 wrote:

    Sorry fellow investors but the people scamming us don't care about this bit of satire as long as their millions keep rolling in. As long the masses don't do anything, they know you are letting off steam and setting back and saying "Just you wait, the next time we will get serious." In the mean time their multimillion bonuses keep rolling in.

    Let me join you in your project. If any one seriously objects to it, just claim they are antibusiness and trying to destroy the American way.

  • Report this Comment On November 28, 2009, at 11:06 AM, PIUMA6 wrote:

    just beautiful, guys!!!

    too bad it's all true, otherwise we could have gotten a good laugh out of it. The fat cats on Wall street probably will, though.

    .

  • Report this Comment On November 28, 2009, at 12:54 PM, wyodan59 wrote:

    If this does not get you behind the audit the fed bill. nothing will. They take your money in the form of income tax and use it just as they story goes. To top it off, they don't answer to anyone.

  • Report this Comment On November 28, 2009, at 2:34 PM, NoMoreSnoozing wrote:

    Someone wrote:

    "My question to you is - how does the revolution begin?"

    The answer is with, "It begins with you calling your Congressman and demanding that he or she support HR 1207!

  • Report this Comment On November 28, 2009, at 8:18 PM, cocoyoc wrote:

    how much are you paying your lobbyist? that is the most important question to qualify for the program

  • Report this Comment On December 03, 2009, at 10:05 AM, BeboLindo wrote:

    Ouch !!! Ouch !!! Ouch !!! Way too true for my liking. Are you guys trying to undermine our financial system with this GREAT SATIRE ARTICLE by pointing out the vast siphons sucking our pockets dry and filling their own coffers with OUR money, bought by piling us with ENORMOUS national debt? All in the name of stimulating our economy and saving our [read: their] financial system, yeah right!

    It makes my blood boil! What further evidence do we need? Sec. Treasurer last year seeking a bank bailout submitting a bill that gave him $780B to do with as he sees fit, subject (explicitly!) to no oversight or review in ANY forum, congress and the courts specifically excluded. What does that sound like to YOU?

    Can you say "Kleptocrat" ?

    This could be a remarkably more prosperous nation if we the people were to overthrow these seditious bloodsuckers and install an HONEST system. Who's in favor of an overthrow? We can do it via the ballot box if we organize and throw out all the corruption at one fell swoop.

  • Report this Comment On December 24, 2009, at 4:50 PM, redvan wrote:

    LOL!! Mo' money, mo' money, mo' money!

  • Report this Comment On October 25, 2010, at 4:26 PM, r42ogn wrote:

    It is so sick. Because I've a bit of money (and I am not rich but I don't have debts) I can borrow at <1% an lend it back to the same bank at >3%, nice for me but it is not right. I'd rather live in a vibrant counrty where initiative build wealth and my kids can do well on their merits. (I'm in London,UK).

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