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Getting Main Street to Call the Shots
America has plenty of cash, but it's in the wrong pockets.
Thanks to massive bailout funding from the Federal Reserve and U.S. Treasury, Wall Street survived the financial crash it created. This year, its titans are enjoying record share prices, corporate profits, and executive bonuses. The financial assets of America's billionaires and the idle cash reserves of the most profitable corporations are at historic highs. Their biggest challenge is figuring out where to park all their cash.
Meanwhile, the Great Recession is still raging on Main Street. The unemployment rate is too high, new jobs aren't appearing despite the supposed economic recovery, and the unprecedented crush of foreclosures isn't letting up. Small businesses are starved for credit. Politicians tell us that the government is broke and debate whether we can afford health care, old age security benefits, and student loans.
America is awash in money. But the cash is in the wrong pockets and it's being used for the wrong purposes.
During the Great Depression, the American people benefited greatly from new rules that created a powerful and accountable system of credit unions, mutual savings and loans, and community banks. This system financed the U.S. victory in WWII, built the nation's middle class, and made the United States the world leader in manufacturing and technology. It served us well until Wall Street used its political clout to dismantle the rules that made it work.
A massive concentration of banking institutions followed. Wall Street institutions lost interest in funding productive, long-term investments that create American jobs. They now find it more profitable to collect excessive fees and usurious interest rates from consumers, fund speculators, lure the unwary into mortgages they can't afford, bundle junk mortgages to sell as triple-A securities, bet against the clients to whom they sell the over-rated securities, extract subsidies from government, and move their profits offshore to avoid taxes. They use the profits from their financial games to buy back their own stock, acquire equity in other companies, invest in exporting even more American jobs, and pay generous dividends to shareholders and outsized bonuses to management.
In How to Liberate America from Wall Street Rule, a new report from the New Economy Working Group, we propose several commonsense steps to build a modern version of the financial system that once made America the envy of the world.
We recommend that the government break up the mega-banks and implement tax and regulatory policies that encourage strong community financial institutions. We support proposals to create state-owned partnership banks in each of the 50 states to support these local institutions. These partnership banks would be patterned after the Bank of North Dakota, which uses that state's financial assets to partner with community financial institutions in lending to productive local farms and businesses.
We also recommend the creation of a Federal Recovery and Reconstruction Bank, which would fund projects that put Americans to work rebuilding America's crumbling and out-of-date infrastructure. The Federal Reserve can be directed to introduce all newly created money into the economy by passing it to this bank rather than handing it over to Wall Street banks that have no interest in American jobs or productive investment.
It's time for all Americans to step back and consider what purpose the nation's money and banking system should serve. Let's re-create a community-based system of financial institutions that puts money where it's needed to finance a true economic recovery.
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11 Comments so far
Show AllTen years ago I warned my congressman in open meeting about the Neo-Corporate Robber Barons. He ingored that warning and here we are.
David your books are visionary and so too, are many of your solutions. The only suggestion is to take off the gloves. When you note, "We recommend that the government break up the mega-banks and implement tax and regulatory policies that encourage strong community financial institutions" strikes me as Pollyannaish given that "the government" is owned by Oligarchy, and utterly controlled by the forces you decry. What you noted in your book, When Corporations Rule the World, is already come to pass. How exactly to you get those in "government" to take steps that undermine their own livelihood?
"How exactly to you get those in "government" to take steps that undermine their own livelihood?" They also own all the guns and other crowd control weapons they need to keep the masses at bay. Having won the class war they've been waging against us for 40 yrs. we are all now witnessing the final acts of the American Republic and its replacement by the American Plutocracy. This act will be carried out by Barry Obama as the Corporatist shill of this plutocracy and he will gut whats left of the "New Deal" & the War on Poverty programs like Medicare and medicaid. Barry is throwing the poor and the middle class under the wheels for his own benefit.
I like this article, but I to ask is there really anything of signficance that's new under the sun? This writer seems to just be saying we need an economy that's more egalitarian. Hell that's exactly what the New Deal and to the extent he could do it John F Kenedy's New Frontier were about. We don't have to reinvent the wheel. What we have to do is reapply the lessons of history with maybe changing the names of agencies which would administer some of these programs, which would be the main new coming out of all this. If we want to we could move toward what social democratic parties in Western Europe moved toward in the 1940s or earlier, a people managed economy and people owned industries. That's the real way to go along with all employee owned companies such as those backed by British evolutionary psychologist and businessman, David Erdal. This is all about egalitarianism as a practical and idealistic solution to our problems-- all in the context of in the less use and more conservation mode.
I like this article, but I to ask is there really anything of signficance that's new under the sun? This writer seems to just be saying we need an economy that's more egalitarian. Hell that's exactly what the New Deal and to the extent he could do it John F Kenedy's New Frontier were about. We don't have to reinvent the wheel. What we have to do is reapply the lessons of history with maybe changing the names of agencies which would administer some of these programs, which would be the main new coming out of all this. If we want to we could move toward what social democratic parties in Western Europe moved toward in the 1940s or earlier, a people managed economy and people owned industries. That's the real way to go along with all employee owned companies such as those backed by British evolutionary psychologist and businessman, David Erdal. This is all about egalitarianism as a practical and idealistic solution to our problems-- all in the context of in the less use and more conservation mode.
David Korten is a great person, but he has far to much Faith in the Capitalist System. Those Community Banks he speaks, will not be that profitable, because they will not be allowed to function in way that will make them profiable. Here in Oregon we are Talking about a State Bank, but that State bank will not be allowed to compete for Accounts along side the Big Banks. The Capitalist System has been rigged to work for the Wealthy at the expense of Everyone else. David korten I don 't think I Like you that much any more.
Those of us who work the least make the most. When we let bankers control the money, we suffer violence of intention. When we let government control the money, we suffer violence of action. When the bankers and government collude to control the money together, we go to war! Are you ready for WW III?
" Let's re-create a community-based system of financial institutions that puts money where it's needed to finance a true economic recovery."
How?
"The Federal Reserve can be directed to introduce all newly created money into the economy by passing it to this bank rather than handing it over to Wall Street banks that have no interest in American jobs or productive investment."
Why do we need the Federal Reserve to do that?! The peoples' representatives can create a committee from the most economically literate among them to do this job, probably with oversight from some sort of non-governmental panel of monetary system experts, preferably appointed by the people.
And by the way, Mr. Korten, we're never going to get state banks in all 50 states with the Federal Reserve in place, and without the people getting off their asses and DEMANDING it. You can recommend such changes all you want, but the powers of the establishment are not going to do it voluntarily through persuasion.
After all, why would they?
@Carolynn Sills Anderson - One Day Nation-Wide Strike!
Thanks to the folks just signing up! On Friday, we will not work (unless absolutely necessary), we will not shop, we will (if healthy), stand with our strike signs in our hometowns, and we will contact the legislators in Washington to tell them what we're doing, and why. Millions of Americans are being thrown overboard to feed the sharks, we have to we have to do everything in our power to save them. How we treat the least amongst us says far more than any wealth or might we possess. Again, thanks for your courage and compassion.