https://truthout.org/articles/move-over-wall-street-peoples-banks-are-coming-to-replace-you/
Move Over Wall Street, People’s Banks Are Coming to Replace You
Phoenix Goodman, Truthout
Published August 25, 2019
A specter is haunting Wall Street: the public banking movement, which
vows to replace private banks’ influence in public affairs.
This movement is gaining traction in states and cities across the U.S.
as motions to advance public banking are emerging in legislative halls
from California to New York. In response to this momentum, hope is
growing that the first U.S. public bank in 100 years will form in the
foreseeable future. As this movement gains momentum, sparking a chain
reaction, a mass switch to public banks could shift untold billions from
the coffers of Wall Street into Main Streets everywhere, ushering in a
new economic order of democratized finance.
Now is the time for the public banking movement to counter the false
narratives of the opposition and illuminate what the public banking
ideal would look like in practice.
What Would an Ideal Banking System Look Like?
As patience for the “too-big-to-fail” banks wanes, cities and states are
finally realizing they are better off doing for themselves what Wall
Street perniciously insisted we’ve needed it for: providing necessary
banking services to the public. Wall Street has done this with one hand
while recklessly gambling, investing in environmentally destructive
projects, cheating and looting with the other. Wall Street has made us
forget that we have no obligation to put up with exploitation and abuse.
But that’s changing. Its extractive tentacles, which have been
interwoven into public finance, have been an inconvenient fact of our
existence. But now, Wall Street itself is contending with an
inconvenient fact: Activists are newly mobilized in the fight to sweep
away private bankers’ grip from the economy and usher in public sector
replacements. Our hope is that it will become common perception that the
creation and dissemination of money is — like the operation of courts or
fire departments — much better left to democratically accountable and
transparent institutions than to profiteers.
Of course, simply being “public” does not make a bank perfect — and
therein lies the nuance we must address as we seek to create the best
banking system we can. It’s possible for there to be a public sector
bank that is not fully transparent, that has corrupt or incompetent
governance, or that provides special favors to private cronies or
squanders public funds. Consider the scandals that have plagued India’s
public sector banks, as well as those surrounding the Bank of North
Dakota’s investments that have enriched fossil fuel extractors that
encroach on Indigenous land.
Advocates of public banking have an opportunity to avert these problems
before they begin by starting from a blank slate and seeking to craft
the ideal banking system. To do so, we must formulate a type of bank
that most reflects the general will of the commons, competently. It is
not enough to replace what we have with something slightly better or
simply “good enough.” In a moment when the greatest power of our
financial system is ripe for replacement, why waste this historic
opportunity?
We need banks that are not only publicly owned, but accountable,
democratic, local, environmentally and socially conscious, uncorrupt,
competent and conducive to social good and sustainable economic growth.
Problems With the Current Private Banking System
Let’s identify the problems of our current banking system and address
each of them, in order to construct our ideal bank.
Private profiteers own the levers of money and loan creation, which
affect our entire economy and shape it in their interest; this is
financial exploitation.
Banks are giant behemoths that are “too big to fail.”
Banks have no loyalty to the public good, and as such, invest in
socially destructive ways and engage in predatory practices.
Banks have no sense of ecology and sustainability, and will invest
in environmentally destructive practices if short-term profit can be
attained.
Banks are giant casinos that interact with the real economy but are
outside of it. Bankers are often glorified gamblers and take excessive
speculative risks which provide no real value yet funnel huge sums in
bonuses into their pockets for mere bet placing, often using complex
financial instruments like those that crashed the world economy in 2008.
Banks are opaque, with vast conspiracies of secret dealings, hidden
money and collusion. The people can’t get a peek in.
Banks are incompetent at creating a healthy economy for all. They
tell us that their expertise is needed, yet it is their so-called
“expertise” that crashed the economy.
Bankers are unaccountable to the people; their loyalty is to
quarterly shareholder profits alone as they are practically immune to
public oversight, yet their actions affect everyone, amounting to a
conflict of interest. Banks are the heart of the circulatory system of
the entire economy, yet they do not act in the interest of the very
economy dependent on them.
Banks for the People
A “public bank” is simply a bank owned and operated by the public
sector. But a mere “public sector bank” may still be plagued by some of
the other problems on this list. One could imagine, for example, a
public sector bank that corruptly provides favors to private cronies, or
invests in environmentally destructive projects, or lacks accountability.
Indeed, the banks which deal with public finance should themselves be
public — this is a fundamental tenet of banking reform. But that is only
the first step. A fully matured bank reform — the kind that legitimately
solves all the problems of banking — must go further than what the brand
“public bank” can define on its own. Unbound by cynicism, we must take
it all the way and envision a banking system that, by definition, solves
each of the problems.
This is why we need to introduce the concept of the “People’s Bank.”
This gives us clarifying language to define what we mean by the ultimate
end game in public finance, beyond simply being “public sector.”
Let’s define a “People’s Bank” as a financial institution that must
embody the following criteria:
People’s Banks are public — owned by the people. Their profits are
reinvested into society’s development.
People’s Banks are local. People’s Banking entails a network of
municipal and regional banks that all serve their communities.
People’s Banks are socially responsible. People’s Banks are
obligated to serve the public good by adhering to strictly defined
ethical guidelines. They seek profit without sacrificing social good.
Unlike the private firms that our public institutions currently bank
with, People’s Banks would not just pay lip service to language of
social responsibility, but would have its principles strictly enshrined
in the bank charters, making them “socially responsible” banks by
definition.
People’s Banks are environmentally responsible. People’s Banks must
promote sustainability and be barred from environmentally harmful
business practices while encouraged to support green energy development
programs like the Green New Deal.
People’s Banks are productive, not speculative. People’s Banks must
be dedicated to sustainably increasing prosperity of their regions,
barred from engaging in risky casino-like gambling and speculation.
People’s Banks are transparent. Everyone must be able to see
exactly what the bank does, how it operates, how it compensates its
staff and where it invests. This knowledge must always be publicly
available and subject to third-party audits.
People’s Banks are democratic. Boards of directors must be set up
within the banks that reflect representation from the community and are
responsive to their input.
People’s Banks are meritocratic. They must foster a culture of
talent, quality and excellence, and must be opposed to nepotism and
cronyism. Hiring practices must require strict CV standards for the
hiring of competent managers.
People’s Banks are accountable. People’s bankers are not private
profiteers, they are public servants that are rewarded for duty to the
people and are held responsible to them. Boards of directors should
include not only competent financial experts, but representatives of the
community for oversight and to tune the banks to the community’s needs.
These banker/public servants who deliver healthy economic development
are rewarded reasonably, and corruption is duly penalized.
If these criteria were spread through public consciousness, we could
move forward with greatly improved clarity about what we are striving to
build.
Remember: when a public banking movement comes to a city near you,
ensure that those responsible for its creation get the opportunity
right. The iron is hot and getting hotter to incite this systemic shift.
Don’t let corrupt or short-term influences dictate the development of a
new public bank that does not have the standards of a People’s Bank. Go
down the checklist and hold your lawmakers responsible for drafting a
charter that ensures them all, as the California Public Banking Alliance
has done in California. It’s much easier to get something right the
first time than to go back and fix mistakes.
Don’t be fooled by the self-congratulatory faux-oversight and
faux-social responsibility cynically touted by big bank propagandists.
Deregulation is rife, fines are simply a “cost of doing business” and
“corporate social responsibility” is a gilded show which masks systemic
moral hazards. Weak regulations, measly fines and philanthropy
spectacles by no means solve the banking issue — in fact, they
exacerbate it by stalling true reform, by giving us “the thing without
the thing.” Only banking that is at its core by and for the people can
count as legitimate.
Consider, for example, Bank of America’s pretentious display of social
responsibility. Beneath the carefully constructed marketing, the
pernicious truth lies. Bank of America misleads clients, engages in
fraud and discriminatory lending, and had to pay the largest civil
settlement in history for financial fraud leading up to and during the
financial crisis. An ersatz marketed persona of social responsibility
bears no resemblance to a People’s Bank built as a triple bottom line
entity at its core.
Wall Street firms paint a thin veneer of socially responsible rhetoric
over their foundation of hubris and greed. People’s Banks’ entire
identities are centered on being fundamentally socially responsible.
Creating Real Democracy
We tend to imagine ourselves a democracy, but the immense power of
finance — which itself stands outside the political sphere and controls
politics via lobbyists — subverts our democracy. Voting reform is surely
needed and direly overdue, but is there any doubt that private capital
is the greatest power in our plutocracy? Indeed, it’s no secret that the
levers of finance and big business determine the agenda to which the
rest of us are forced to submit. Do we vote for Wall Street CEOs? Are
they accountable to us? Can we switch them out every election cycle like
our politicians? Yet, they wield not only power, but capital — the most
dominant power in our society.
There is simply one question we must ask: Who’s going to oversee our
economy — those accountable to plutocrats, or those accountable to the
people?
The oligarchy pays lip service to democratic ideals yet subverts it at
every turn. The kingly tyrants that classical liberalism overthrew were
replaced by plutocratic tyrants, who, rather than rule overtly, now rule
by proxy behind the smokescreen of our democratic institutions. The
politicians come and go — mere window-dressing — while the plutocrats
laugh all the way to the bank … their banks!
This reveals a sobering fact: We literally cannot have a real democracy
until finance itself is democratic. Until the levers of money creation
are under public accountability, we will have a pseudo-democracy
subverted by financiers behind the curtain. But when that pillar of our
system is brought under democratic accountability via People’s Banks, we
may begin to see economics, and politics itself, shaped in a much more
democratic image, and the real changes so direly needed can come to bear.
It’s going to take legislative assemblies across the country to push
forward the motions that will institute People’s Banks. In other words,
it is up to elected officials and the public pressure behind them to
bring this “true democracy” to the fore. That has been the challenge —
getting the very people who are so often bought by corporate interests
to vote on the side of the people.
But let’s not be immobilized by cynicism. History is on the side of
People’s Banking. By its very nature of it being a local phenomenon,
based on cities and states, People’s Banking offers certain localities
in the “laboratory of democracy” the right to try it for themselves and
prove the model to the rest of the country, which will seek to emulate
its successes. There are still plenty of well-intentioned elected
officials who can and will champion People’s Banks, and waves of
progressive populism may yet bring more non-corporate underdogs into
public office with the vision and will to bring it forward. Even fiscal
conservatives will likely continue to wake up to the fact that private
bank profits on public projects equate to extracted tax dollars, which
would be better recycled back into public coffers.
Finally, one more banking crisis, which many analysts are now finding
inevitable, will decisively refute the private banking propaganda to
which we have been subjected for generations. 2008 was the first
opportunity to transform banking, but the movement had not yet
sufficiently matured to demand People’s Banks, so Wall Street bought
time. This next time, things will be different.
Milton Friedman, the influential libertarian free-market theorist, said
in 1982:
Only a crisis — actual or perceived — produces real change. When
that crisis occurs, the actions that are taken depend on the ideas that
are lying around. That, I believe, is our basic function: to develop
alternatives to existing policies, to keep them alive and available
until the politically impossible becomes politically inevitable.
The neoliberal project of mass privatization and conglomeration that
Friedman crusaded for is reaching its twilight. In its wake, the people
are now creating the alternatives to existing policies which will in
time become politically inevitable.
We are on the verge of a great shift. Patience for the old paradigm is
nearly exhausted. A transformation of banking in the United States would
have far-reaching effects on the state of global capitalism in general.
One-hundred years after the last U.S. public bank was founded in North
Dakota, the public banking movement is finally gaining real momentum.
Let’s seize this moment wisely, and make sure that the public banks that
begin to spring up are not just any public banks, but the best type of
public banks: People’s Banks.
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