Public Banking Is the Answer
Conniff, Ruth, The Progressive
Co-ops, renewable energy, sustainable agriculture ... all of these efforts to create a better society run counter to the values of Wall Street.
Wall Street speculators have badly distorted our economy and our communities by maximizing short-term profits at the expense of the public's long-term interests.
And then, with their chokehold on Washington, they have managed to hold us up for trillions of dollars in bailout funds after gambling their depositors' money away.
These same financial institutions use predatory lending practices to steal money from the poor. And when it comes time to financing public-works projects, we lose billions by paying their inflated interest rates.
Money and access to credit help determine what kind of a society we live in, what our priorities are, and what our future looks like. It's time to take back this critical part of our infrastructure from the financial industry.
There is a better way.
Just the other day, the executive director of the Public Banking Institute stopped by The Progressive's offices in Madison, Wisconsin, during a visit to speak with local officials who want to set up a county-owned bank.
Marc Armstrong, who worked for years in the financial industry, now devotes his time to the public banking movement.
"When 2008 happened, it was a big eye-opener," Armstrong says. He had worked for IBM Finance, and Bank of America and Wells Fargo were two of his clients.
"Why do banks need our help?" he asked himself. "Why does the federal f government need to bail them out?"
"For most of us, bankruptcy is the end point for a business. But not for banks," he adds. "I got into this because it was an economic justice issue.
Armstrong read Ellen Brown's book Web of Debt, and, together with Brown and others in the Bay Area, helped found the Public Banking Institute.
The organization's vision is to establish numerous locally owned banks throughout the United States, so city and county and state governments can fund worthy projects with low-cost loans and plow interest payments back into their own communities.
It's not a new model. The Bank of North Dakota has been making loans to local businesses and farms at low-interest rates for more than ninety years. The government development Bank of Puerto Rico has been around since 1941. And Costa Rica owes its economic success in part to public banks.
Germany made a commitment as a nation to get off nuclear power two and a half years ago. In the United States, where inspiring rhetoric about ending climate change has run into the fan blades of industry resistance, it's hard to imagine such a dramatic policy shift. But Germany has public banks to fund the country's massive investment in solar power.
In this country, at the state and local level, low-interest loan programs for small farmers and ranchers, retrofitting homes for energy independence, and supporting local businesses that keep jobs in a community could get a boost from public banks. Many of these programs are in place but are starved for funds.
Armstrong offers an example from his home state of California of a social ill public banking could solve:
Thanks to toxic capital appreciation bonds created by Wall Street, over the last seven years, California public schools got $9 billion in loans. In twenty-five to thirty years, the interest due on that $9 billion will be $27 billion.
"The Occupy generation will foot a $36 billion bill for the use of $9 billion today," says Armstrong.
This is but one instance of a larger societal crisis.
"Public financing has been completely co-opted by Wall Street investment banks and their toxic products," says Armstrong.
In their great book, The Betrayal of the American Dream, Donald Barlett and James Steele tell a brutal anecdote about the rebuilding of the San Francisco Bay Bridge. …