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The pandemic has shown that we need a public option for basic banking services. (Photo: Shutterstock)

The pandemic has shown that we need a public option for basic banking services. (Photo: Shutterstock)

We Need a Public Option for Banking

As families struggle to get stimulus checks, it's time to fix the rusty pipes of our inequitable financial system.

Raúl Carrillo

 by OtherWords

The COVID-19 pandemic response has shown that the very foundations of our economy are shaky, fragile, and—for some of us—downright dangerous.

We’re once again watching working people, especially working people of color, bear the brunt of the fallout. Meanwhile, big companies traded on the stock market took two-thirds of the money meant to bail out small businesses.

As big banks have exited the business of serving poor people, one in four U.S. households are now underbanked or unbanked.

But in getting relief out, it’s also become clear that we have a plumbing problem: We are forced to rely on the banks as middlemen to deliver government assistance.

Some of them are seizing our stimulus payments to pay themselves. And as big banks have exited the business of serving poor people, one in four U.S. households are now underbanked or unbanked. This has predictably led to marginalized communities and households waiting in distress for life-sustaining stimulus funds, simply because they lack access to a bank account.

The good news is that there’s another way. The pandemic has shown that we need a public option for basic banking services.

Legal scholars Morgan Ricks, John Crawford, and Lev Menand have called for the Federal Reserve System to directly offer accounts to all U.S. citizens, residents, and small businesses. Today, only privileged banks and governmental entities are allowed to have these high-interest, low-fee accounts.

But the Fed could easily offer the same option to everyone, and provide better consumer safeguards than Wall Street, as well as higher interest, faster payments, and complete deposit protection. As a recent New York Times editorial endorsing FedAccounts for getting out stimulus payments put it: “Stop Dawdling. People Need Money.”

The Fed could also work with the U.S. Postal Service to broaden its reach—strengthening our postal system at a time when it is facing continued attacks from predators.

As the Roosevelt Institute, a think tank, has shown, “Fed Accounts For All” could make sending money as easy as transferring funds through Venmo or Paypal—but with Fed Accounts For All, everyone could do it, without relying on Wall Street (or Silicon Valley).

Even after the pandemic, Fed Accounts For All could make it easier to prioritize assistance through more direct fiscal policy, avoiding ongoing issues with delayed funds, debt collection, and frozen bank accounts. A public option for basic banking services, and an improved, publicly accountable payments system, are necessary parts of a recovery infrastructure that works for everyone.

House Financial Services Chair Maxine Waters introduced legislation to create FedAccounts, and the Ranking Member on the Senate Banking Committee, Sherrod Brown, also introduced a bill to use FedAccounts.

Their proposals would ensure that no one needs to use an expensive check casher to access their stimulus payment, because the Fed—in partnership with the U.S. Postal Service—could deliver the payments to every household.

These bills were incorporated into the House version of the CARES Act in March. Unfortunately, the Senate stripped this provision out of the bill that passed. But it’s not too late for them to get it right in the next stimulus bill. Our unbanked and underbanked neighbors are depending on it.


This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License.

Raúl Carrillo

Raúl Carrillo wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas and practical actions. Raúl is a student at Columbia Law and a graduate of Harvard College. He is a co-organizer for The Modern Money Network (MMN), an interdisciplinary educational initiative for understanding money, finance, law, and the economy. Follow him at @ramencents.

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