It’s Time to Democratize Banks

The time has arrived for public takeover of major US banks. The corporate model of banking has led to irresponsible investments, lavish executive gains, further bank consolidations, and, in part, to home foreclosures that have ravished communities.

An increasing number of economists, including Nobel laureates Joseph Stiglitz and Paul Krugman, are calling for at least a temporary public takeover of the largest banks.

More tax dollars to bailout insolvent banks will only benefit shareholders and executives – widening the gap between the very rich and everyone else. Congress should protect taxpayers by opposing any further bailouts.

The FDIC has in the past taken over insolvent banks, wiped out debts, and placed them back on the market. The only difference now is scale.

Congress should also create financial incentives for worker ownership of banks returned to the market. Worker-owned cooperatives exist in every state and all over the world – including banks. Cooperative businesses in general are more transparent, democratic, and responsible.

Credit unions are one form of financial cooperatives. They serve their local communities, not stockholders who may live in another state or country. They are responsible to their owner-members who are also their customers. The do not engage is wild speculative investments.

The time has arrived to democratize banks.

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Vision of Hope on Economic Systems

February 9, 2009
Vision of Hope Speaker Series, Xavier University

It’s impossible to explore economics, economic systems, and a vision for an inclusive economy in a vacuum. Economics is not a silo but rather a web with vast interconnections

We live in a time of immense crisis – multiple crises which together threaten not only our economy, but society and like support system itself.

We also live in a time of immense opportunity with vast possibilities for improvement of the human condition and a more right relationship between human beings and the rest of the natural world.

The crises and opportunities are at their root more than any single or even multiple issues. It involves the prevailing economic myth, what others might call the dominant paradigm, still others the accepted story, while still others the major framework.

Whatever you’re preferred term (I’ll use framework), it’s the one that says economic growth is good and more growth is better because it means more stuff is created which we can consume — which is the definition of self-worth and meaning since, as Madison avenue says “You are what you drive.”

“Endless more” is the major economic goal.

Another element of the dominant framework is the belief that econometric, macro/micro, monetary/fiscal, inflation/deflation, the federal reserve, fiat currency, the GDP, and other economic stuff is so incredibly complicated that only a select few can understand it all — only the paternalistic and benevolent economic sages. Economics is treated as a virtual branch of physics because we’re told the economy seems to operate by forces beyond human control via “the Market,” the “Invisible Hand,” or some other cosmic force akin to gravity. Government should have little or any regulatory or controlling role because to try to tinker with natural forces is inefficient or impossible – similar to trying to regulate the tides or the sunset.

Well, it turns out the uncontrolled and unregulated economic tides have created a global economic and ecological tsunami that has washed away jobs, companies, pensions, home values, security, and a good deal of the ozone. That’s the negative. The positive is that the economic crisis has exposed the inherent failure of the dominant economic framework – an economic system one that has become increasingly detached from serving the interests of people, our communities, and the earth’s caring capacities.

The economic paragons who we were told to entrust all power and authority pursued their own interests at the expense of everyone else and the planet. The Invisible Hand was actually a clenched fist that landed in the midsection of the middle class and poor. The Market it turns out is incapable of addressing serious environmental problems.

Fashioning an economy for all, an inclusive economy, must begin not with an economic prescription but a political one, actually a human prescription. The basic principle should be this: people must have a right to decide issues that affect their lives, their communities, their environment. People must possess the right to decide.

Under our current economic system, this is for the most part not possible. Economic decisions are considered private decisions – even those made by transnational business corporations – top down economic institutions with the power to determine the fates of millions of workers and communities and where the Bill of Rights have no relevance.

The most important sector of the economy to address is the financial sector. The power to coin and distribute money is at the root of all others. Banks and other financial institutions have long been deemed as potential threats to self-governance – from Revolutionary times through the Populists of the 1870’s-1890’s to the present.

In an 1802 letter to his Treasury Secretary Albert Gallatin, President Thomas Jefferson reflected:
I believe that banking institutions are more dangerous to our liberties than standing armies. 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 [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

My vision of hope in constructing an inclusive economy…and inclusive government, thus, is focused on financial institutitions.

I’ve developed a 10 point plan – the first 5 focused on the financial sector, the 2nd 5 on related issues.

1. Hold those responsible for the current crisis responsible – both individuals and companies. Bank CEO’s and other officers who have used bank bailout money for lavish bonuses or golden parachutes should be jailed and funds returned. Banking corporations that have misused bank funds for CEO buyout or bank acquisitions should be forced to return taypayer funds. Companies responsible for the home foreclosure crisis should have their corporate charters revoked and reorganized. This would serve as an important deterrent of future abuse.

2. It’s time to democratize banks. Bailing out banks simply because they’re too big to fail means their too big to exist. More bailout funds, as economist and Nobel Prize laureate Joseph Stiglitz says in a recent article calling for government take over of banks, would simply waste hundreds of billions of dollars and not solve the credit crisis. Banks would simply further consolidate with the few that remain more politically and economically powerful. Democratizing banks would mean bank investors would lose out. It would also mean money could finally be directed to help those facing home foreclosures.

3. Democratize issuance of currency by making the Federal Reserve a total public entity – a 4th branch of the government with checks and balance of issuing money decided by Congress – as many are suggesting. It’s absurd to permit a entity that is partially private to determine our nation’s money supply.

4. Fundamentally restructure the International Monetary Fund and World Bank. It’s time to abolish odios debt of underdeveloped nations who in most cases long ago paid back the principle of their original loan with hefty interest. End the Structural Adjustment Program which link loans to gutting a nation’s economic sovereignty. Focus on micro loans promoting sustainability and decentralization.

5. Fund a new federal program that provides financial and technical incentives to democratize banks and corporations via cooperatives. Other nation’s have hundreds, if not thousands, of economic cooperatives that supply everything from manufacturing to banking. They are democratically run. It’s time for our nation to provide major incentives for that here.

6. Abolish corporate personhood. The notion that business corporations can possess Bill of Rights and other constitutional protections must cease. Corporate rights threatens the economic health of communities but also what is little left of our democracy.

7. Reverse Buckley v Valeo, the 1976 Supreme Court decision equating money with free speech. Money isn’t speech. It’s property. When invested in politics, money from the wealthy drowns out the voices of those without money. The ever-widening income and wealth gap, perpetuated by government policies, will never be narrowed unless the political power of the wealthy is minimized. Reserving Buckley is an important step in this direction.

8. Keep public assets public. It seems every public asset has at one point or another been targeted for sale at the municipal, state and federal government. Privatization/corporation of public assets reduces public control. Keeping public assets public is the surest way to maximize transparency and responsibility of workers and directors who are unable to hide behind the legal shield erected by corporations in the name of protecting “trade secrets” or “propriety information.”

9. Develop new measurements of well being. The Growth Domestic Product (GDP) merely measures economic growth – be it good or bad. Building a needed house or a unneeded nuclear bomb factory both add to the GDP. We need a different economic ruler – one that measures not just economic advancements but also quality of life which involves more than mere economics – such as happiness.

10. Replace the “endless more” growth economic model with a sustainable and just model based on tenants of respect, dignity, equity, democracy, cooperation, and meeting basic physical needs, not insatiable wants. This involves two tracks. We need macro economic institutions and policies (some of which mentioned earlier) along with programs like social security, environmental protections, green technologies, minimum wage, and labor regulations. We also need micro economic alternatives (i.e. cooperatives, land trusts, local currencies, community supported agriculture, participatory budgeting).

It is time for us to take charge of our economy. It is complicated but we can not be intimated. We can demystify and demythologize it. There are people who are working on popular economics. We the People have in the past come together in powerful social movements to educate ourselves and then take action on nuclear power, nuclear weapons/war, the wars in Central America and Iraq, and numerous environmental problems. Each time we were told: “leave it to the experts,” or “they know best.” Each time we educated ourselves and came to know enough to know what we were being told was not true and was against the interests of the vast majority of our fellow citizens.

When it comes to economics, we all have PhDs in what it’s like to live through what is arguably the most severe economic crisis in the history of this nation outside of the great depression.

At its core, we must remember that economics is about morals and values — not pie charts, graphs, percentiles, or trends. It’s not a cosmic force. Virtually everything that has, is and will happen is due to conscious and willful decisions made by human beings – often times who are accountable and responsible to few if any others. That’s the problem. Others making decisions for us.

Shouldn’t we have the power and authority to make decisions affecting our lives and communties? Real democracy. Real participation. Real inclusion. And real soon.

Proposed Bank Bailout: Part II/More Calls to Democratize Banks

Treasury secretary Timothy Geithner’s bank bailout proposal announced today is more similar than different to Hank Paulson’s bank bailout plan — based on the sketchy details presented. It protects banks and stockholders at the expense of taxpayers and citizens. Big bank CEO’s have convincingly demonstrated their incompetence at doing anything other than helping themselves to taxpayer bailout money. Banking corporations, on the other hand, showed their mastery of buying up other banks and shored up their bottom lines using taxpayer bailout money.

Under the new Treasury proposal banks and bank CEOs will receive more money from you and me. However the proposal “stop[s] short of ordering banks to issue new loans or requiring them to account in detail for the federal money,” as reported by the New York Times (link below).

No need to account in detail for the federal money. Are they serious? Call it Blank Check Bank Bailout II.

More people are wising up to democratize banks on economic grounds, including economist Dean Baker, co-director of the Center for Economic and Policy Research (link below). Democratizing banks can save money and address home foreclosures.

Absent from either article is the rationale to control banks on democratic grounds. Ever-growing financial institutions have corrupted politics through political campaign contributions/investments, lobbying, the writing of laws, and political implications to workers and communities of controlling credit.

We need to call on our Representatives and Senators to democratize banks.

http://www.nytimes.com/glogin?URI=http://www.nytimes.com/2009/02/11/business/economy/11bailout.html&OQ=_rQ3D1Q26refQ3Dtodayspaper&OP=1beb1d36Q2FQ3B7nQ5DQ3BQ2A-Q60oQ7B–uUQ3BUQ20Q20Q23Q3BQ20UQ3BQ27Q27Q3BQ5DzoPQ5BnooQ3BnQ60-Q5B-_IQ3BQ27Q27Q5DWPb-zuQ25Q24u_b
Bailout Plan: $2.5 Trillion and a Strong U.S. Hand
By EDMUND L. ANDREWS and STEPHEN LABATON
Published: February 11, 2009

http://www.alternet.org/workplace/126354/geithner%27s_folly%3A_the_bank_rescue_plan_is_a_disaster_in_the_making/
Geithner’s Folly: The Bank Rescue Plan Is a Disaster in the Making
By Brad Reed, AlterNet. Posted February 11, 2009.

Stopping foreclosures by turning the tables on corporations

Many people subjected to home foreclosures are using a new strategy — going nowhere. They’re demanding that the original home loan contract be produced — the very note that in the frenzy to make as much money as possible by banks on home loans was often sliced, diced, repackaged and resold by one bank to another…then to another…then to another…

Toledo area Congressperson Marcy Kaptur has vocally called for staying put and demanding banks produce the original paperwork.
http://www.brasschecktv.com/page/550.html

What’s interesting about this approach is that it turns the tables at least to some degree on the corporate crowd hiding behind contract law.

It was the corporate crowd who first professed that corporations had “rights” in 1819 in Dartmouth College vs Woodward by claiming that a corporate charter was a “contract” — making it difficult for governments to control corpses since contracts were sacred agreements between two equal parties.

Well, what happens when one party to a housing loan contract (the bank) can’t produce the original contract to the homeowner or it’s unclear who actually owns the loan? Shouldn’t the contract be null and void?

Many people believe so.

This shouldn’t be the only approach to go after financial institutions for their scandalous predatory loan practices (not to mention public officials who’ve refused to demand bailout money be used foremost to address the foreclosure crisis), but it is one approach.