That defuses the objection raised in a March 15 editorial in The Detroit News, arguing that Michigan can ill afford the $150 million capital investment to start a bank. If operated like the BND, the Michigan Development Bank would soon be a net generator of state revenues. There are other possibilities besides a bond issue for providing the capital to start a bank, but that subject will be reserved for another article.
The BND's 90-year track record of prudent and profitable lending defuses another objection to state-owned banks: that a public agency cannot be trusted to act responsibly in managing public funds. The Detroit News editorial concluded that Michigan should "leave banking to the bankers," but it is precisely because the bankers have destroyed the economy with their reckless lending practices that the public needs to step in. We need a "public option" in banking to set standards and keep private banks honest.
The True Potential of Publicly-owned BanksNorth Dakota broke new ground nearly a century ago, but the true potential of publicly-owned banks remains to be explored. Nearly all of our money today is created by banks when they extend loans. (See the Chicago Federal Reserve's "Modern Money Mechanics", which begins, "The actual process of money creation takes place primarily in banks.") We the people have given away our sovereign money-creating power to private, for-profit lending institutions, which have used it to siphon wealth from the productive economy. If we were to take that power back, we could generate the credit we need to underwrite a whole cornucopia of projects that we don't even consider because we think we lack the "money." We have the labor and we have the materials; we just lack the "liquidity" necessary to put them together to create products and services.
Money today is just a ticket, a receipt for work performed and goods delivered. We can fund the work we need done by creating our own credit. The real promise of publicly-owned banks is not that they can bail out subprime borrowers but that they can jumpstart the economy by creating real wealth. They can provide the liquidity to put labor and materials together, allowing the economy to build and grow. Our private, profit-driven banking sector has been bleeding wealth from the rest of the economy. Public-interest banks can transfuse the economy with the credit it needs to flourish and be productive once again.
For more updates on the movement for publicly-owned banks,
see http://www.public-banking.com.
To
sign a petition for a citizen-owned bank in California, go to http://www.change.org/actions/view/help_the_terminator_save_california.
First posted on Yes! Magazine.
Niko Kyriakou contributed to this article.
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