You are hereOpEd News: Could state-owned banks have prevented our financial crisis?

OpEd News: Could state-owned banks have prevented our financial crisis?

-By Richard Clark

June 26, 2011- What would be the benefits of keeping most of our money in our home state?

Clearly, our current financial systems, nationwide and in each of our states, aren't working.   The gap between the rich and poor is growing;   worker lay-offs and state deficits are increasing, and many, many people need jobs.   The answer to our money problems lies in generating enough credit.   Without enough credit, economies cannot grow.

Our current economic system is directly dependent on our biggest banks.   On August 31, 2010, Washington State (for example) had 68% of its current deposits of $5.4 billion dollars in nine private banks that are headquartered outside the Pacific Northwest.   These private banks are of course in business to make profits that go to their owners and their shareholders, wherever they may live.   Secondly, it is not the mission of these banks to supply credit to Washingtonians so that they can start businesses, go to college, or buy equipment for their farms or other business enterprises.   Thirdly, these 9 banks benefit immensely from keeping Washington's state government revenue on their balance sheets.   And they are able to leverage all this money (multiplying it many times) to create new loans, including out-of-state loans, and to invest much of this Washington state money, both private and public, on Wall Street.   But think about this:   Why should "banksters' be allowed to invest and gamble the money of the people of Washington state (or any other state) on Wall Street?!

Solution to this problem

Instead of banking on Wall Street, Washington State (and every other state) needs to bank on Main Street.   Its own Main Street.   This means public banking.

A state-owned public bank partners with community banks, credit unions and bigger banks to supply affordable credit to local economies.   Ever more credit then translates into ever more loans -- for business start-ups, for farmers, and for high tech companies and builders -- all in your home state.   And much of the profits these companies and people make then circulates around the state, the same money being spent again and again, first by one person, and then by the recipient, and then by the next and the next, which creates what is called the multiplier effect, which means that it boosts everyone's income and standard of living, statewide. 



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