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Payment Mediation Banks effect payments from depositors’ accounts. An omnibus fund can do the same. Payments out are directed “redemptions” in the language of brokerage accounts, or withdrawals in the language of bank accounts. Payments in are “subscriptions” to brokers and their clients, or deposits to bankers. All these payments can be electronic. A payer, typically a customer, might swipe a card or click a screen. A payee, typically a vendor, typically must verify first that the account is authentic and covers the payment offered. An omnibus fund could be well suited to give this quick transparency. First, it is essentially an index fund. It is composed of a published ratio of index ETFs and index mutual funds and index-equitized cash. Individual accounts are then hedged or exposed to index swaps or future overlays administered by the omnibus fund itself. The fund can track all these indexes online, and knows from tick to tick what each account is worth. This holds true even for volatile accounts where risk- tolerant clients have opted for long legs in swaps and futures. So long as management effects all payments in an out, and constructs each account of index exposures itself, and tracks those exposures and payments in real time, it knows account values exactly. Risk-tolerant clients will expect daily ups and downs in account size. That means that they will have to carry larger accounts in order to be sure of covering payments in the downswings. That would be a problem if accounts yielded zero return, as checkable bank deposits do. The gist of my answer to Milton Friedman was that no amount of money is too much if it yields as much return as other assets of equal risk. Accounts are hedged or leveraged to do so. Omnibus fund accounts burn no holes in pockets. We do not own one to spend, like a checking account, and treat it as a drag on earnings until spent. We own it as a fully competitive investment, and spend it reluctantly when bills are presented. Chapter 8 Banks, Money and Macroeconomics 2/8/16 7 HOUSE_OVERSIGHT_011096