This article originally appeared in the December 2013 edition of The Progressive. For more great content like this, subscribe today for as little as $10 a year and get a 2014 calendar as a free gift.
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 our money away.
Meanwhile, 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 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, helping citizens in local communities across the country set up their own banks.
"When 2008 happened, it was a big eye-opener," Armstrong says. At the time, he was working for IBM financial. Bank of America was one of his clients.
He was shocked, he says, as he watched the big bank bailout moved through Congress. "Why do banks need our help?" he asked himself. "Why does the Federal government need to bail them out?"
"For most of us, bankruptcy is the end point for a business," he adds. "But not for banks."
"I got into this because it was an economic justice issue."
Armstrong read attorney and best-selling author Ellen Brown's book Web of Debt, and, together with Brown, helped found the Public Banking Institute.
The organization's vision is to establish numerous city and locally owned banks throughout the United States, so local 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. And the government development bank of Puerto Rico has been around since 1941.
Other countries have public banks that make public investment possible.
Germany, for example, 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 doing something dramatic to end climate change has run into the fan blades of industry resistance, it's hard to imagine such a dramatic policy shift -- especially when it comes to alternative energy.
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, supporting local businesses that keep jobs in a community get a boost from public banks.
And the interest paid to public banks doesn't go to line the pockets of investors. Instead, it's plowed back into the community.
Armstrong offers an example from his home state of California of a social ill public banking could solve:
Thanks to a toxic product 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 $37 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.
Here's another example:
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.
Governor Arnold Schwarzenegger met with the steel workers who worked on this massive project in 1989 to thank them for their great work "welding, painting, lifting, designing, shipping, all of those things in order to help us in California rebuild our Bay Bridge."
It was a typical political photo op. Except, Steele and Barlett write, "the setting wasn't Pittsburgh, Chicago, or Los Angeles. Schwarzenegger was standing in a steel plant thirty minutes outside Shanghai."
The Bay Bridge project exemplifies how "some politicians have abandoned even the pretense that they want to create jobs in America."
A consortium of U.S. steel producers lost out in a bidding war with China. Schwarzenegger justified going with the Chinese firm because it saved $400 million. But that didn't count the lost jobs, their impact on the economy, or the extra costs in sending 200 engineers and contractors to China to provide technical advice and make sure the project met specs.
But here is the kicker: the labor costs Shwarzenegger "saved," on a $6.4 billion project were a pittance compared with the $6 billion in interest payments to Wall Street for the job.
But those interest costs never made the news.
California saved a few million on labor -- at a steep cost to American industry and American workers -- but gave a free pass to the banks.
To end this kind of wasteful spending, Ellen Brown, along with progressive members of Congress Bernie Sanders and Peter DeFazio, have been pushing for a national infrastructure bank. Under the Sanders plan, that bank would be run by the U.S. Post Office.
"The deposits of the nation's savers can be invested in government securities that are in turn used for rebuilding the nation," Brown explains. "It is a win-win-win, providing a way to save the post office while at the same time protecting our deposits and rebuilding our decaying roads and bridges without dipping into taxes."
North Dakota has twenty-six loan programs that specifically target areas of the economy the state wants to develop. Longterm investments in high-tech startups, light manufacturing, and irrigation systems that don't waste water are among the projects financed through the North Dakota public bank.
In local communities everywhere, public banking could allow citizens to be part of an effort to put real money behind values we all share.
"We can empower ourselves with the same tool the Wall Street banks have -- credit," Armstrong says.
That's a big deal, since credit now makes up 97 percent of the money supply in the United States.
Imagine the possibilities of putting low-cost loans in the hands of the people all across the nation.
"A lot of people are connecting the dots," says Armstrong. "They realize that the existing system is not working. We're still paying $85 billion a month to Wall Street banks in bailout money. But there's been no bailout for Main Street."
Keeping the focus on Main Street, the Public Banking Institute is mostly talking to local government officials, who are not under as much pressure from the banking lobby as federal and state officials.
It's a simple case to make: debt-servicing costs give away millions that could be used by counties to finance public projects themselves.
"We're not going to Washington to ask permission. It really is a matter of localities," says Armstrong.
So far Philadelphia, Vermont, Washington State, and a few counties in California and Pennsylvania are considering resolutions or building political organizations in order to establish public banks.
Of course, a nationwide effort like the postal bank would have even more impact.
The Post Office already has branches in every town and community, Ellen Brown points out. And from 1911 until 1967 it provided basic checking and savings.
As the number of Americans who are shut out of banking grows -- about one in four households according to a 2011 survey -- there is a real need for banks that provide basic savings and checking, and don't gamble with depositors' money on risky schemes.
And there is a need for the public to take back the power to make the kinds of economic decisions that will keep a community healthy.
"It's all about a democratic economy," says Armstrong. "We don't think we have a say in our economy, but we really do."
'The ruling class is defined by its ability to move money beyond government supervision. This has been accomplished in various ways, but the most important is arguably the establishment of a belief that government has no business in business.'
--Donald Bartlett and James Steele, The Betrayal of the American Dream
'It is also a way to vote with our feet, moving our money out of an increasingly risky and rapacious Wall Street into a network of publicly-owned banks that serves rather than exploits us.'
--Ellen Brown, president of the Public Banking Institute
Photo: Flickr user Tax Credits, creative commons licensed.