Banking on the Public
Source Dave Anderson
Date 13/07/18/11:20
Banking on the Public
Going Postal, North Dakota, and Other Finance Alternatives


HUNDREDS OF people seeking a roadmap for remaking the banking system
gathered north of San Francisco in early June at Public Banking 2013:
Funding the New Economy, a conference held at Dominican University,
whose Green MBA program was a cosponsor. It was the second annual
gathering sponsored by the Public Banking Institute (PBI)—the
California-based nonprofit that is popularizing the idea of a North
Dakota-style public bank.

A handful of fans of rightwing populist Ron Paul mingled with Occupy
Finance folks, grizzled leftists, and middle-class suburbanites whose
eyes were opened to the dysfunction of the financial system as they or
their neighbors were foreclosed upon. According to PBI, 20 states
currently have legislative advocates for state banks, a reform also
backed by the think tank Demos, the Center for State Innovation in
Madison, the Institute for Local Self-Reliance, and Gar Alperovitz,
the author of America Beyond Capitalism who was a keynoter at the
conference. The North Dakota bank, formed in 1919 after the
farmer-backed Nonpartisan League took over the state legislature,
holds the deposits of municipalities and the state government, and
collaborates with small banks in the state on loans for small
businesses and farmers. During a period when too-big-to-fail banks
dismiss smaller loans as being unprofitable, this partnership gives
community banks important backing, and indeed, North Dakota has more
community banks than any other state. The public bank also generates a
surplus that supports the state treasury.

Researchers from PBI, Demos, Institute for Local Self-Reliance and CSI
all point out that North Dakota weathered the last bust better than
most states not only because it is in the midst of an energy boom but
because its public bank provides countercyclical support. The public
bank operates on a longer time horizon, and ensures that public
deposits are invested close to home, unlike public monies placed in
Wells Fargo or JP Morgan Chase. Many governments use these larger
banks because smaller community banks don't have the capacity to
handle their relatively large deposits. The state bank solves that

Postal banks got a big boost at the conference when James Sauber, the
chief of staff of the National Association of Letter Carriers
announced that both his union and the American Postal Workers Union
will partner with PBI in a campaign to reinstate simple checking and
savings accounts in post offices. The U.S. Postal Service offered
simple affordable banking services used by many working class people
from 1911 to 1967 when the system was dismantled. “In the 1940s, 4.2
million American had accounts at the post office,” Sauber said. In
other countries, postal banks remain important institutions, most
notably in Germany, Britain, New Zealand (launched in 2002), Brazil
(launched in 2000) and Italy, although Japan is beginning to privatize
its postal bank, the largest in the world. The U.S. postal workers are
intrigued not only by postal banks' potential to offer social
inclusion—28% of Americans don't have full access to banking
services—but also by the revenue generated that supports the postal
system as a whole. “Don't dismantle this institution—reinvent it,” he

The conference boasted another major announcement: The city of
Reading, Pennsylvania is redirecting its deposits from big corporate
banks and channeling them to local banks that will invest locally by
working with a financial intermediary that will handle the
relationship. This strategy was promoted by public banking activists
in the state and Tom Sgouros, a progressive policy consultant and
journalist based in Rhode Island, following PBI's conference in
Philadelphia last year.

The state bank idea faced a setback when the Boston Federal Reserve
issued a report dismissing the idea after the Massachusetts
legislature agreed to explore it. But with successful public banks
operating around the globe, activists in California, Oregon and
Vermont in particular are not letting naysayers slow them down.

The conference organizers apparently made it their aim to build
left-right alliances. PBI President Ellen Brown's 2008 book The Web of
Debt: The Shocking Truth About Our Money System and How We Can Break
Free—won an audience among Tea Partiers with her analysis even while
defending a government-run bank. The eclecticism—and at times
wrong-headedness—was on display at the podium. After a Green Party
leader opened the conference, Bill Still, who ran for the Libertarian
Party nomination for U.S. president, told the crowd, “We need to get
rid of the government's ability to borrow...You need to reissue
sovereign money.” His film, The Money Masters: How International
Bankers Gained Control of America, was praised by W. Cleon Skouson,
the John Birch Society-aligned writer championed by Glenn Beck.

Some activists also appear to believe that the public banks will push
corporate banks out of operation. Occupy Finance member Julia
Willebrand, the Green Party candidate for NYC comptroller, was
sporting a “Break Up Big Banks” button, and was challenged by a PBI
staffer who said the government wouldn't have to do that because the
state banks would remake the system. Of course, Germany has a whole
system of public and cooperative banks that live quite happily without
threatening Deutsche Bank and big finance. Indeed, after the recent
crisis, Germany's Left Party proposed a scheme for reducing the power
of the corporate banks in favor of public and cooperative banks,
acknowledging that it will be a long struggle.

In his plenary, Gar Alperovitz warned against “projectism,” falling
into the trap that one initiative—for a public bank, say—can transform
the system. “Can we get our heads around the notion that people like
us...can transform and build an entirely new economy?” Those
championing banking as a public utility cheered their answer.

ABBY SCHER is a sociologist and journalist who was co-editor of
Dollars & Sense in the 1990s. She is now a D&S Associate and an
Associate Fellow of the Institute for Policy Studies.

SOURCES: Axel Troost and Philipp Hersel, How a Socialization of the
German Banking System Might Look Like, (New York: Rosa Luxemburg
Stiftung, October 2012); Ellen Brown, The Web of Debt: The Shocking
Truth About Our Money System and How We Can Break Free (Third
Millenium Publishers, 2008); Amy Rapoport, The People's Bank, American
Prospect, April 1, 2013; Doug Henwood,Web of Nonsense, Left Business
Observer, July 2009; Arthur MacEwan, “Should We Blame ‘Fractional
Reserve' Banking?” Dollars & Sense, May/June 2013.

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