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Should We Create a Progressive Bank?

Submitted by Bob Fertik on April 7, 2009 - 7:35am.

Marcy Wheeler wants everyone to close their Chase account to protest JP Morgan Chase's efforts to force Chrysler into bankruptcy.

JP Morgan Chase’s corporate single-mindedness threatens to put 40,000 Chrysler workers in Michigan out of a job, along with 150,000 Chrysler dealer employees and tens of thousand workers at Chrysler’s suppliers.

And JP Morgan Chase’s insistence that it should jump the line ahead of retirees means hundreds of thousands of retirees may lose healthcare benefits they worked all their lives to earn.

Michigan’s economy is already in terrible shape. But JP Morgan Chase seems intent on making it much worse.

So what is Marcy doing with her money?

I’m withdrawing my money from Chase and investing it in a credit union owned by—and helping—Michiganders.

Excellent idea. But could we take this idea one step further? What if we all took our money out of Big Banks and moved it into a "Blue Bank"?

Obviously we're a pretty large group: 70 million of us voted for Barack Obama. We may not be rich, but if we each deposited $1,000 that would be $70 billion.

If we wanted to start from scratch, we could start a new credit union (assuming we could qualify as an "Association") or a bank. But why jump through all the startup hoops? If we collected deposit pledges worth a decent amount ($10 million?), we could negotiate with existing smaller banks to find one "worthy" of our collective funds.

The key issue would be defining the criteria of a "worthy" bank. Obviously it would have to be well run, profitable, with a solid balance sheet. Since we're all scattered, it would need state-of-the-art online banking. The tough issue would be judging whether we like how it uses its money, such as the mix of residential mortgages, business loans, commercial real estate, etc.

And if members with extra money want to actually buy a controlling interest in the bank, the bank's owners would have to be willing to sell. And the prospective owners would have to figure out how to organize themselves.

Thanks to the Internet, we can evaluate this idea collectively and openly. And if we bought a bank together, we could manage it transparently both to protect our funds in turbulent times, and to preserve and create good American jobs.

This idea has many precedents, both in the U.S. and abroad. Perhaps the most famous is Amalgamated Bank, founded in 1923 by the Amalgamated Clothing Workers of America, which is a commercial bank chartered in New York with nationwide service. But this example also shows the risks: it is now owned by UNITE HERE, but unfortunately that union is in the midst of a nasty divorce.

Are we ready to "Bank Blue"?

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Isn't going local and small part of the answer

Submitted by davidswanson on April 7, 2009 - 9:45am.

not just a second-best choice to going large and national?

Author of the upcoming book "Daybreak: Undoing the Imperial Presidency and Forming a More Perfect Union" by Seven Stories Press.

it depends

Submitted by Bob Fertik on April 7, 2009 - 10:08am.

on what the goals are.

Small banks can help small numbers of consumers and businesses.

Large banks can help large numbers of consumers and businesses.

I'd see how many bucks we can raise in deposit pledges, and get as many bangs as our bucks will buy :)

US' Only State Owned Bank

Submitted by Chip on April 7, 2009 - 3:35pm.

North Dakota's experience in running one of the nation's only state-owned bank may offer some interesting insights and guidelines. Some excerpts from MoJo's article, How the Nation’s Only State-Owned Bank Became the Envy of Wall Street, by Josh Harkinson:

  • Could opening state-owned banks across America get us out of the financial crisis? It certainly might help, says Ellen Brown, author of the book, Web of Debt, who writes that the Bank of North Dakota, with its $4 billion under management, has avoided the credit freeze by “creating its own credit, leading the nation in establishing state economic sovereignty.”
  • Our funding model, our deposit model is really what is unique as the engine that drives that bank. And that is we are the depository for all state tax collections and fees. And so we have a captive deposit base, we pay a competitive rate to the state treasurer.
  • ...we have specifically designed programs to spur certain elements of the economy...agriculture or economic development...energy...education...federally-insured student loan...entrepreneurial startups...
  • We also provide a dividend back to the state. Probably this year we’ll make somewhere north of $60 million, and we will turn over about half of our profits back to the state general fund. And so over the last 10, 12 years, we’ve turned back a third of a billion dollars just to the general fund to offset taxes or to aid in funding public sector types of needs.

A couple of thoughts about Bank Blue:

  • Why not a credit union structure, where depositors own the credit union? I don't know which structure would be preferable, but a comparison might be worth examining.
  • Why not have as priorities the Obama administration priorities? We know that health care reform, education, energy and the economy are the administration's four areas of emphasis, so why not invest in funding them in our local communities?
  • Why not a national federation offering banking products to county/regional banks/credit unions? Local folks know their local economies, needs, and depositors. In a large entity, accountability could be lax, but there would be greater scrutiny in a small environment.
  • Aside from accountability and local conditions, there's a good deal to be said for not being "too big to fail." So the trick is to use national economies of scale to assist local and regional economies in their growth and development cognizant with the four Obama administration priorities.

It's time to rethink fractional reserve banking entirely.

Submitted by markov on April 9, 2009 - 4:19pm.

Sure, we could start a Blue Bank, and it would be great, for a while. And then, because of our business laws and corporate culture, it would eventually become acquired and monetize the good name we built for it until it became a meat grinder like every other corporation.

We need to make CXO's responsible under the law for the actions of their companies. They shouldn't hold their fiduciary duty to the stockholders above obeying laws of the land.

We need to destroy (through simply-phrased law) the notion of corporate personhood, utterly.

And, we need to stop allowing banks to create money and charge interest on money they never had to begin with. Fractional reserve lending allows banks to loan what they don't have, meaning they collect up to 9 times the stated interest on their reserve deposits. While, in the meantime, they offer us interest rates that barely compete with inflation on our investments with them. This is an outrage.

~M

P.S. See businessjive.com to see how the Wall St. Clearinghouse system is used to create counterfeit stock.

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