The Public Banking Solution

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered.... I believe that banking institutions are more dangerous to our liberties than standing armies.... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." -Thomas Jefferson

“The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.” -Abraham Lincoln

“Let me issue and control a nation’s money and I care not who writes the laws.” Mayer Amschel Rothschild

In an age of information where more and more people are waking up to the realities of the financial domination that corporate interests have over our society, activists and concerned citizens have begun to realize the socially and environmentally destructiveness of big private banking.  Over and over, the big banks have proven themselves incapable of scrupulous behavior without regulatory oversight- and since President Reagan, much of regulations including Glass-Steagall have been dismantled. This has not only occurred under republicans, both corporatist parties are culpable. Democratic President Bill Clinton publicly declared "the Glass–Steagall law is no longer appropriate."

Ultimately, the obnoxious hubris of Wall St. led to the financial crisis of 2008.  This crisis was of course saved by public, not private funds, empirically disproving the laissez faire experiment.  Unfortunately, the management of those public funds  to the tune of over $700 Billion was controlled by inept politicians whose strings were pulled by revolving-door Wall St. plutocrats such as Hank Paulson- then Treasury Secretary and former CEO of Goldman Sachs.  The massively de-regulated financial free-for-all, followed by allocation of vast public funds to reward the bankers for their irresponsibility is essentially a reverse-bank heist:  the bankers have in effect demanded they be bailed out- indeed, the reckless investing that many Wall St. bankers engaged in was fueled by the moral hazard that they knew they were too big to fail and would inevitably end up being bailed out anyways.- privatized gains and socialized losses.

This means we are officially a plutocracy.

Is there an alternative to this madness?

The Public Banking Solution

One thing we all know is that
1. Banks have enormous influence over the economy
2. Banks make a lot of money.

Banking is the financial circulatory system of the economy- providing loans and deposits for individuals, businesses and governments.  A private banking system places the vampires in charge of the blood bank- since profit for shareholders will always take precedence over people and planet, an inherent moral hazard is at play- if maximized profits don't align with maximized social benefit (and they rarely if ever do!) than profit will take precedence, indeed, social benefit is hardly a factor taken into consideration at all, as Thomas Jefferson noted so aptly in his famous quote. Bankers are accountable to their board of directors and CEO's, not to the people. Is it any surprise then, progressives face such uphill battles in fighting for social and environmental justice?

Furthermore, consider the notorious bonuses Wall St. bankers are paid and profits the banks themselves earn.  Considering these banks are engaged in rigged gambling and speculation, it is taking to the people being beholden to a large casino in which the house (the big banks) always wins.  While small business owners and laborers work day after day to produce real value in the form of tangible goods and services, interest paid to the private banks from the productive sector of the economy creates vast profits for the banks, which are then rewarded to the speculators at the expense of the People.

This means that at a stroke, the Public Banking model would provide an enormously more ethical system of banking.  If bankers were in effect public servants, subject to public scrutiny and acting in the explicitly declared interest of the people, every banking action would be done with the premise that it is being done for the public good.  The interests and incentives of the public servant bankers would be aligned with the common good.

Additionally, considering the vast profits the banks reel in, consider instead such profitability going towards a public institution in the name of the people.   These profits would constitute revenue for the state- which then could reinvest into infrastructure, education and other essential public services, rather than a 3rd yacht for some Manhattanite Wall St. banker.

Today, most municipalities banks with corporations well-known for their corruption.  Yet, no one thus far has had enough will and vision to demand that our civic authorities in the name of the people only have the highest ethical standards for the placement of our money.  We've drummed along accepting the status quo, and Wells Fargo, Chase and the like fatten their pockets all the while.

With the implementation of a Public Bank, we the people will be the shareholders!  This means that we the people will be who the public servants who run the bank have to answer to.

According to The City of Los Angeles' 2016 Comprehensive Annual Financial Report (CAFR) there is over 17B in Net Investment in Capital Assets in Los Angeles.

A city bank will be able to leverage deposits and loan money within the community. A bank creates money once it creates a loan, so a city could borrow from its own bank at no cost if it ran a responsible bank.

When the city or state need to raise funds to invest in public works and infrastructure projects, they currently get a loan from a private bank, just like you get a loan to buy a car or build a home, and pay it off in installments over time, with interest.  At the state level, billions in interest end up being paid to the banks. In essence, the people work and pay taxes, and a portion of those taxes are funneled into the bankers hands!  It doesn't have to be this way.  If instead such loans were secured from a state bank, the interest paid would instead be recirculated back into the public coffers, instead of re-channeled into private hands.  With billions saved in interest, the possibilities for savings and re-investment are vast.

There is already a precedent that can inspire us: The Bank of North Dakota. According to the Public Banking Institute:

"The Bank of North Dakota is a major money-maker for North Dakota, returning about $30 million annually in dividends to the treasury – not bad for a state with a population that is less than one-fifth that of the City of Los Angeles. Every year since the 2008 banking crisis, the BND has reported a return on investment of 17-26%.

Like the Bank of North Dakota, a Bank of the City of Los Angeles would provide credit for city projects – to build bridges, restore lakes, and pay bills – and this credit would essentially be interest-free, since the city would own the bank and get the interest back.  Eliminating interest has been shown to reduce the cost of public projects by 35% or more.

There you have it.

In short, a public banking option will provide accountability to the people, align the interests of banks to the interests of the people, reduce moral hazard and save the people billions of dollars!

The era of awakening to the realities of the pernicious private banking system is now transitioning to the era of making real world, practical solutions a reality- and the Public Banking option is one of the most important solutions we can implement.

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