Democratize Banks

The Cleveland Plain Dealer in their lead January 26 editorial concluded the federal bailout of financial institutions wasn’t working. It’s main suggestion was for more transparency. This didn’t quite seem sufficient given the enormity of the problem. What follows is a response…

27. January. 2009

Letters to the Editor
Plain Dealer
Cleveland, Ohio

Editor,

The PD is correct that the Wall St. bailout isn’t working – unless you’re one of the largest US banks that’s used public tax dollars for executive golden parachutes or to purchase other banks, such as PNC’s purchase of Cleveland-based National City. This will lead to further economic concentration and threats to self-governance.

Many of the largest recipients of the blank-check taxpayer-funded bank bailout also lobbied Congress for more bailout money with virtually no strings attached. Recent financial disclosure reports document that American Express , Capital One , Goldman Sachs , KeyCorp, Morgan Stanley , PNC, and Bank of New York Mellon all lobbied the government on the bailout.

The bailout is arguably the most massive transfer of public resources to business corporations in US history since the give-away of public land to the railroad corporations in the 19th century

The prescription to the flawed bailout however, isn’t more transparency, as the PD contends. It’s more control, specifically public control.

It’s time to expand democracy to the financial sector through public take-over of corporate banks. Public control of banks could result in a moratorium on home foreclosures. Once the toxic loans are addressed, some or all banks could be returned to the private sector – as worker-owned cooperatives. There are hundreds of US worker-owned enterprises, thousands more abroad, including banks.

Cooperative banks are by their nature transparent and accountable to workers and to the public. As a result, they are unlikely to engage in the risky, bizarre, and irresponsible investments that became typical of the largest corporate banks.

It’s time to democratize banks.

Greg Coleridge

Coleridge is Economic Justice & Empowerment Program Director of the Northeast Ohio American Friends Service Committee

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The Global Financial Crisis

An insightful video connecting the blank check bank bailout with corporate power, self-governance, and other issues…

http://video.google.com/videoplay?docid=-5524526231174165759&ei=3c9zSdaJDZPiqQLwjIS7BQ&q=Michel+Chossudovsky+THE+FINANCIAL+CRISIS
THE GLOBAL FINANCIAL CRISIS
The Great Depression of the 21st Century
with Michel Chossudovsky

Causes and consequences of the financial meltdown;
The speculative onslaught;
Financial fraud and the “bank bailouts”;
Bankruptcy of the real economy;
Impacts on employment, wages and social services;
Towards a spiralling public debt;
The economic crisis and its relationship to the Middle East war;
The centralization of corporate power;
The concentration of wealth;
The globalization of poverty.
What are the policy alternatives

No More Bank Bailouts

Rep. Barney Frank (D-Mass), chairperson of the House Financial Services Committee, is calling for the release of the remaining $350 billion of the $700 billion financial bailout package. Hearings in the House are scheduled for tomorrow (Tuesday) with a vote as early as Wednesday.

Our message should be: NO MORE BLANK-CHECK BANK BAILOUTS

The first $350 billion was an early holiday gift for the largest banking corporations in the US. Most banks receiving the funds banked them rather than using them to help people facing foreclosures. What funds that banks did spend were used for two purposes:

1. To provide large banks resources to buy other banks, further consolidating financial wealth and power. The takeover of National City bank by PNC bank in Pittsburgh was but one example.

2. Executive pay increases. An Associated Press study found that $1.6 billion went to bailed-out bank executives in bonuses and other benefits.

The Northeast Ohio American Friends Service Committee was categorically against both versions of blank check bank bailout – its original version (which was too much for even Congress to swallow) and its revised version with a few added token conditions. Limiting executive pay was supposed to be its major addition.

Now Frank is back wanted the remaining $350 billion.

Treasury Secretary nominee Timothy F. Geithner and President-elect Barack Obama economic team are promising big changes.
They claim they want to use rescue funds to help homeowners avoid foreclosure and unclog the credit markets that finance loans to consumers, small businesses and municipalities.

Frank says he wants to restrict executive bonuses and, according to the Washington Post article, “require firms that receive federal aid to explain how they are spending the money.”

Transparency and accountability would be welcome improvements but is this all we the public should expect? Frank and his colleagues should DEMAND how public money will be spent rather than giving banks the virtual freedom once again to do what they want.

We the People may also want to advocate for these 3 items:

1. Any future financial bailouts of private companies (banks or otherwise) should include the conditions of public ownership — i.e. exchange of preferred shares of corporate stocks in exchange for public funds. Voting shares of corporate stock should be used to leverage companies to act with more transparency, to treat workers more fairly, and to create more sustainable company practices. It could also be used to extend political democracy into the economic arena by encouraging democratic workplaces, thousands of which exist throughout the world.

2. Those responsible for the banking crisis be held personally liable — i.e. prosecution of financial institution leaders and no bonuses or golden parachutes.

3. An immediate moratorium on foreclosures and evictions of low- and moderate-income people until the economy stabilizes.

Contact your Representative and Senators right away.

——–

Making and enforcing new rules is necessary, but that will not be enough. The nation needs a new perspective on the markets, one that acknowledges the self-destructive bent of unfettered capitalism and its ability , unchecked, to wreak havoc beyond Wall Street.
– New York Times editorial, September 16, 2008

Whoever controls the volume of money in any country is absolute master of all industry and commerce.
– James A. Garfield, President of the US, from Ohio