Occupy Wall Street Calls for a Public Banking Option
Sustainable Finance: by Reynard Loki, of justmeans.com
One of the demands floating around the Occupy Wall Street protest movement has been a call for a public banking option. In an October 8 interview on the Real News Network, Dr. Michael Hudson, a professor of economics at the University of Missouri-Kansas City, explains this demand:
“The demand isn’t simply to make a public bank but to treat the banks generally as a public utility, just as you treat electric companies as a public utility. The key about public utilities is their rate of return is guaranteed and the rules which they operate under are guaranteed. Just as there was pressure for a public option in health care, there should be a public option in banking. There should be a government bank that offers credit card rates without punitive 30 percent interest rates, without penalties, without raising the rate if you don’t pay your electric bill. This is how America got strong in the 19th and early 20th century, by essentially having public infrastructure, just like you’d have roads and bridges…The idea of public infrastructure was to lower the cost of living and to lower the cost of doing business. You’re not going to do that if you let Citibank write the rules.”
Ellen Brown, the president of the non-profit Public Banking Institute writes, “We don’t hear much about a public banking option in the United States, but a number of countries already have a resilient public banking sector…the model remains a viable alternative to the private profiteering being protested on Wall Street today.”
America’s only state-run bank is the Bank of North Dakota, which was originally set up to provide loans to farmers. Unsurprisingly, this bank has been getting a lot of national attention of late. As of August 2011, North Dakota has the country’s lowest unemployment rate at 3.5 percent — the only state below 4 percent (Nebraska comes in second place at 4.2 percent). Brown notes that North Dakota is the only state to have had a continuous budget surplus since the banking crisis began.
 Tolle, Eckhart. A New Earth: Awakening to Your Life’s Purpose.London: Penguin Books, 2008, p. 20.
 Brown, Ellen Hodgson and Reed Simpson. Web of debt: the shocking truth about our money system and how we can break free.Baton Rouge: Third Millennium Press, 2007, p. 76.
This is a well-written article that reviews several options. After studying the situation for some time I reached the same conclusion that the author, and I believe Ellen Brown did, that the best immediate course of action is to introduce more alternative public banks issuing debt-free/and or low interest funds, by spending it into the economy. As you state, countries that adopted the mixed model have weathered the international crisis fairly well.
According to what I understand from Ellen, one of the one of the major flaws in the current US Fed system is that all US money is created out of debt through banks loans, and there is not enough money in the system to pay the interest on those loans. Hence the high debt rate. We need some way of creating debt-free money to solve that problem. The beauty of establishing state or local public banks is that the process is not reliant on Washington politicians.
They can play the Fed game, while Local governments moving their money out of the big banks into their own state-chartered banks, where they can:
- Avoid bank fees and climbing interests
- Invest and spend locally, instead of sending funds out of state.
- Offer better banking services to their constituents, creating competition with the big banks.
- Partner with local state chartered banks and co-ops, strengthening them.
All of which could change the way big banks do business, without a single Congressional action.