Abstract: Traditionally, governments have established licensing requirements for the
issuance of important classes of monetary instruments – namely, deposit
obligations and bank notes. Their issuance has been a legal privilege. This article
proposes a similar legal regime for other short-term IOUs, which present similar
problems. The approach would be functional rather than formalistic. The article
sketches a prototype of such a regulatory system. In addition, the article offers a
critical analysis of current reform initiatives pertaining to the short-term funding
markets. It finds reasons to doubt that they will be effective. It proposes an
alternative, coordinated regulatory approach that could be implemented under
current U.S. law.