Consider municipal banks

October 21, 2011

Richard Salzman

OPINION By RICHARD SALZMAN

Ten days into the Occupy Wall Street protests, I wrote letters to the editor of several papers complaining about the lack of mainstream media coverage. By the time that letter was printed, they finally got to the story, to their credit.

There are now “Occupy” actions taking place in 1,482 cities across the country including in my own town of Arcata in Humboldt County, California.

Surprisingly, even as the media has covered the story, many seem mystified by the motives and/or lack of a cohesive message. Does “people’s needs, not corporate greed” explain it?

San Francisco Supervisor John Avalos  wants his city  to pull its money out of corporate financial institutions and start a municipal bank “so we can control how we are investing in local businesses…” I hope other cities and states will also consider this option.

Long ago, I pulled my money from a big bank and put it into a local credit union. Then it was recently publicized that the CEO of my small “non-profit” credit union was taking home just shy of a million dollars a year in compensation (making the $160k that our county administrative officer earns seem pretty reasonable). I’m sure people would love to put their money in a publicly-owned bank whose CEO doesn’t get paid a million dollar salary.

Here are more excellent ideas, some from Senator Bernie Sanders and some from Rolling Stone contributor Matt Taibbi:

1. Break’em up.   If it’s too big to fail, it’s too big to exist. Start with repeal of the Gramm-Leach-Bliley Act and the separation of insurance, investment and commercial banks.

2. Pay for bailouts.  A speculation fee on credit default swaps, derivatives, stock options and futures would pay for the bailouts

3. Cap credit card interest rates, end usury so they’re not permitted to charge  25 plus percent interest.

4. Tax hedge-fund gamblers more then 15 percent on their income.

5. The Fed needs to provide small businesses in America with low-interest loans like it gave to foreign banks.

6. Stop Wall Street oil speculators from artificially increasing oil prices.

Richard Salzman lives in Humboldt County on California’s Redwood Coast, where he works as an Illustrators’ Rep and Political Consultant.


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94 Comments

  1. rsalzman says:

    Glad to see I could spark such a lively debate!

    For those of you who want to support the Wall Street Occupiers go to: http://www.nycga.net/how-to-help/ where you can donate money, order them food to be delivered, or arrange to send supplies.

    As to arguments on the six suggestions, it might help to read from the sources (see below) as my abbreviated versions are even more prone to misinterpretation then the full explanation will be.

    One example, the reference to “pay for the bailouts” was to pay BACK the bailouts already made, not to make more bailouts. And taxing speculators will only hurt day traders and those who buy and sell stock in seconds and minutes if not days. Long term investors and consumers would not be hurt by a one tenth of one percent tax on trades, in fact it would likely lead to greater stability in the market.

    To learn more about how successful public banks can be
    (North Dakota owes it’s thriving economy and a budget surplus of 1.2 Bil. in large part to theirs: http://www.webofdebt.com/articles/state_bank_option2.php)
    you can read about them here: & here: )

    On this topic, why is it that you’d trust your safety to public fire and police departments and our national security to the U.S. Military (the best in the world), but you’re sure that when it comes to banking, government employees will not measure up? I’m a patriot. I love my country and I believe in my country and that starts with a government of, for and by the people.

    Details on the six points:

    Matt Taibbi

    http://www.rollingstone.com/politics/news/my-advice-to-the-occupy-wall-street-protesters-20111012

    1. Break up the monopolies. The so-called “Too Big to Fail” financial companies – now sometimes called by the more accurate term “Systemically Dangerous Institutions” – are a direct threat to national security. They are above the law and above market consequence, making them more dangerous and unaccountable than a thousand mafias combined. There are about 20 such firms in America, and they need to be dismantled; a good start would be to repeal the Gramm-Leach-Bliley Act and mandate the separation of insurance companies, investment banks and commercial banks.

    2. Pay for your own bailouts. A tax of 0.1 percent on all trades of stocks and bonds and a 0.01 percent tax on all trades of derivatives would generate enough revenue to pay us back for the bailouts, and still have plenty left over to fight the deficits the banks claim to be so worried about. It would also deter the endless chase for instant profits through computerized insider-trading schemes like High Frequency Trading, and force Wall Street to go back to the job it’s supposed to be doing, i.e., making sober investments in job-creating businesses and watching them grow.

    3. No public money for private lobbying. A company that receives a public bailout should not be allowed to use the taxpayer’s own money to lobby against him. You can either suck on the public teat or influence the next presidential race, but you can’t do both. Butt out for once and let the people choose the next president and Congress.

    4. Tax hedge-fund gamblers. For starters, we need an immediate repeal of the preposterous and indefensible carried-interest tax break, which allows hedge-fund titans like Stevie Cohen and John Paulson to pay taxes of only 15 percent on their billions in gambling income, while ordinary Americans pay twice that for teaching kids and putting out fires. I defy any politician to stand up and defend that loophole during an election year.

    5. Change the way bankers get paid. We need new laws preventing Wall Street executives from getting bonuses upfront for deals that might blow up in all of our faces later. It should be: You make a deal today, you get company stock you can redeem two or three years from now. That forces everyone to be invested in his own company’s long-term health – no more Joe Cassanos pocketing multimillion-dollar bonuses for destroying the AIGs of the world.

    To quote the immortal political philosopher Matt Damon from Rounders, “The key to No Limit poker is to put a man to a decision for all his chips.” The only reason the Lloyd Blankfeins and Jamie Dimons of the world survive is that they’re never forced, by the media or anyone else, to put all their cards on the table. If Occupy Wall Street can do that – if it can speak to the millions of people the banks have driven into foreclosure and joblessness – it has a chance to build a massive grassroots movement. All it has to do is light a match in the right place, and the overwhelming public support for real reform – not later, but right now – will be there in an instant.

    Bernie Sanders:

    http://www.huffingtonpost.com/rep-bernie-sanders/wall-street-protests_b_1000642.html
    1) If a financial institution is too big to fail, it is too big to exist. Today, the six largest financial institutions have assets equal to more than 60 percent of GDP. The four largest banks in this country issue two thirds of all credit cards, half of all mortgages, and hold nearly 40 percent of all bank deposits. Incredibly, after we bailed out these big banks because they were “too big to fail,” three out of the four largest are now even bigger than they were before the financial crisis began. It is time to take a page from Teddy Roosevelt and break up these behemoths so that their failure will no longer lead to economic catastrophe and to create competition in our financial system.

    2) Put a cap on credit card interest rates to end usury. Today, more than a quarter of all credit card holders in this country are paying interest rates above 20 percent and as high as 59 percent. When credit card companies charge 25- or 30-percent interest rates they are not engaged in the business of “making credit available” to their customers. They are involved in extortion and loan-sharking. Citigroup, Bank of America, and JP Morgan Chase should not be permitted to charge consumers 25- to 30-percent interest on their credit cards, especially while these banks received over $4 trillion in loans from the Federal Reserve.

    3) The Federal Reserve needs to provide small businesses in America with the same low-interest loans it gave to foreign banks. During the financial crisis, the Federal Reserve provided hundreds of billions of dollars to foreign banks and corporations including the Arab Banking Corporation, Toyota, Mitsubishi, the Korea Development Bank, and the state-owned Bank of Bavaria. At a time when small businesses can’t get the lending they need, it is time for the Fed to create millions of American jobs by providing low-interest loans directly to small businesses.

    4) Stop Wall Street oil speculators from artificially increasing gasoline and heating oil prices. Right now, the American people are being gouged at the gas pump by speculators on Wall Street who are buying and selling billions of barrels of oil in the energy futures market with no intention of using a drop for any purpose other than to make a quick buck. Delta Airlines, Exxon Mobil, the American Trucking Association, and other energy experts have estimated that excessive oil speculation is driving up oil prices by as much as 40 percent. We have got to end excessive oil speculation and bring needed relief to American consumers.

    5) Demand that Wall Street invest in the job-creating productive economy, instead of gambling on worthless derivatives. The American people have got to make it crystal clear to Wall Street that the era of excessive speculation is over. The “heads, bankers win; tails, everyone else loses” financial system must end. Most important, we need to create a new Wall Street that exists not to reward CEOs and investors for the bets they make on exotic financial instruments nobody understands. Rather, we need a Wall Street that provides financial services to small businesses and manufacturers to create decent-paying jobs and grow the economy by productive means. Think of all of the productive short- and long-term investments that could be made in our country right now if Wall Street used the money it has received from the federal government wisely. Instead of casino-style speculation, Wall Street could invest in high-speed trains; fuel-efficient cars; wind turbines and other alternative energy sources; affordable housing; affordable prescription drugs that save people’s lives; and other things that America desperately needs. That is what we have got to demand from Wall Street.

    6) Establish a Wall Street speculation fee on credit default swaps, derivatives, stock options and futures. Both the economic crisis and the deficit crisis are a direct result of the greed and recklessness on Wall Street. Establishing a speculation fee would reduce gambling on Wall Street, encourage the financial sector to invest in the productive economy, and significantly reduce the deficit without harming average Americans. There are a number of precedents for this. The U.S had a similar Wall Street speculation fee from 1914 to 1966. The Revenue Act of 1914 levied a 0.2-percent tax on all sales or transfers of stock. In 1932, Congress more than doubled that tax to help finance the government during the Great Depression. And today, England has a financial transaction tax of 0.25 percent, a penny on every $4 invested.

    Making these reforms will not be easy. After all, Wall Street is clearly the most powerful lobbying force on Capitol Hill. From 1998 through 2008, the financial sector spent over $5 billion in lobbying and campaign contributions to deregulate Wall Street. More recently, they spent hundreds of millions more to make the Dodd-Frank bill as weak as possible, and after its passage, hundreds of millions more to roll back or diluter the stronger provisions in that legislation.

    The Occupy Wall Street demonstrators are shining a light on one of the most serious problems facing the United States — the greed and power of Wall Street. Now is the time for the American people to demand that the president and Congress follow that light — and act. The future of our economy is at stake.


    For more on the 5 biggest banks: http://www.truth-out.org/which-bank-worst-america-5-behemoths-hold-our-political-system-hostage/1319299908
    For more on Occupy Wall St: http://www.truth-out.org/it-should-be-everywhere-free-economy-liberty-plaza-park/1319217053

    (5) 9 Total Votes - 7 up - 2 down
    • justme says:

      The entire truth is known by three people. Two are being protected by the media, one is being ignored by the media. Greenspan, Blankfein and Ron Paul.
      Until the first two are in court and the other is President don’t expect anything but a worsening economy and continuous transfer of wealth from the deserving to the slimy.
      Paul is using the word “conspiracy” as of late. Duhhhh.
      Why no questions for Greenspan, Blankfein and others? Because they might tell the truth?

      (1) 3 Total Votes - 2 up - 1 down
      • justme says:

        That freak of nature Blankfein when questioned on his shenanigans responded with, “We’re doing God’s work here”.
        Let that sink in awhile, gang. Then think about it when making your credit card payment or better yet your mortgage payment to he and his ilk, Shalom.

        (1) 1 Total Votes - 1 up - 0 down
  2. abigchocoholic says:

    wow,

    read all the posts this morning and you people are so funny. No really. Just pathetic.

    Zero personal responsibility and just can’t wait to point the finger at anybody other than yourselves.

    You keep on whining and the world will keep on spinning right around you.

    (-10) 22 Total Votes - 6 up - 16 down
    • Typoqueen says:

      You’ve added so much depth to the discussion. Thanks for setting everyone straight with your enlightening post..

      (3) 13 Total Votes - 8 up - 5 down
    • JonnyB says:

      LOL

      Personal responsibility? When the game is rigged and the Banksters CONTINUALLY get bailed out? From 1929 to Ronnie’s S&L to Clinton’s Latin America/Asia crisis to Dubya’s bailout? And those are just the major ones!’

      Privatize the profits and socialize the losses, the CONservative way!

      (10) 18 Total Votes - 14 up - 4 down
      • r0y says:

        You are correct to point out that is it a rigged game, but you are so completely lost thinking only one party or political ideology is responsible for it. Your passion is admirable, but you seem to completely lose focus trying to deride one side of a political spectrum. Everyone’s hands are dirty from this. Show me a national-level politician that does not come out a millionaire. (I know there’s a couple, but almost all of them today have become very rich).

        (2) 4 Total Votes - 3 up - 1 down
        • JonnyB says:

          Not saying the Dems aren’t dirty too, but the Repugs/CONservatives rigged the game to FAIL!

          It WASN’T the progressives who hosed US on this.

          CRA loans did about 4 times better from 1977-2001. How?

          How about HUD

          CLINTON:

          In 2000, as HUD revisited its affordable-housing goals,…HUD restricted Freddie and Fannie That year, Freddie bought $18.6 billion in subprime loans; Fannie did not disclose its number

          THEN DUBYA:

          In 2001, HUD researchers warned of high foreclosure rates among subprime loans. But by 2004, when HUD next revised the goals, Freddie and Fannie’s purchases of subprime-backed securities had risen tenfold.

          That year, President Bush’s HUD ratcheted up the main affordable-housing goal over the next four years, from 50 percent to 56 percent

          From 2004 to 2006, the two purchased $434 billion in securities backed by subprime loans

          YES, WHO IS IN CHARGE REALLY DOES MATTER.

          THE DEMS WHO WENT ALONG WITH “FREE TRADE” ARE HOSING US, BUT FORTUNATELY OVER 70% OF THEM VOTED AGAINST THE LATEST JOB KILLERS!

          (1) 5 Total Votes - 3 up - 2 down
    • justme says:

      Speaking of “spinning”.

      (1) 1 Total Votes - 1 up - 0 down
    • justme says:

      After listening to you I believe their must be life on Mars.

      (1) 1 Total Votes - 1 up - 0 down
  3. JonnyB says:

    CRA is not to Blame for the Mortgage Meltdown
    It’s time to stop the scapegoating: According to a study by the Federal Reserve, 94% of high-cost loans originated during the housing boom had nothing to do with Community Reinvestment Act goals. Lending to poor didn’t spur crisis -Fed’s Kroszner

    CRA was effective long before the subprime market existed.

    Most subprime lenders weren’t covered under CRA.

    Wall Street created the demand for riskier loans

    Regulatory oversight and accountability was missing.

    The majority of subprime loans went to white borrowers.

    Misplaced Blame

    In recent weeks, Republicans in Congress have been blaming a lot of things, besides themselves, for the subprime mortgage debacle. And many of these same Republicans have long wanted to abolish the Community Reinvestment Act, a landmark law that helped to rebuild some of the nation’s most desolate communities by requiring banks to lend, invest and open branches in low-income areas that had historically been written off.

    These two goals have converged in a new attempt to blame the law for the financial crisis.

    In addition, subprime lending was not driven by banks, which are covered by the act. Rather, most subprime lending was driven by independent mortgage lending companies, which the act does not cover, and, to a lesser extent, by bank affiliates and subsidiaries that are not fully covered by the act. By some estimates, nonbank lenders and bank affiliates and subsidiaries may have originated 75 percent or more of the riskiest subprime loans.

    http://www.nytimes.com/2008/10/15/opinion/15wed2.html?partner=permalink&exprod=permalink

    (1) 11 Total Votes - 6 up - 5 down
    • JonnyB says:

      How did we get here? It is a complicated story, but a quick summary goes like this: When the Bush administration took office in 2001, most home borrowers got conventional (“prime”) loans or they could not buy.

      Subprime lending was still a relatively small part of the total mortgage market.

      But a combination of a hands-off regulatory approach to the mortgage industry, a low interest-rate environment maintained by the Greenspan Federal Reserve, a president cheering on an “ownership society”, and Wall Street firms rushing in to pool together prime and subprime loans and challenge the dominance of the existing Fannie Mae and Freddie Mac home mortgage securitization system, set the stage for an explosion of higher risk lending.

      Now, as even Wikipedia will tell you, “the term ‘subprime’ refers to loans that do not meet Fannie Mae or Freddie Mac guidelines.” So how can Republicans point to Fannie and Freddie to lay blame when asked about the current housing crisis? Only to change the subject and point away from the inevitable outcome of pervasive underregulation.

      http://www.huffingtonpost.com/david-m-abromowitz/when-in-doubt-yell-fannie_b_127688.html

      (3) 13 Total Votes - 8 up - 5 down
    • mkaney says:

      Who brought up the CRA? Only you. Because you are repeating one of the party mantras. The Republicans say it’s the CRA and the Dems say no it’s regulation. I certainly didn’t say the CRA caused this. I said manipulation of the money supply via low interest rates fueled this. Stop reading partisan blogs, start learning about the Austrian school of Economics.

      (0) 14 Total Votes - 7 up - 7 down
      • JonnyB says:

        Sorry Bbb, the Austrian school is bogus, be honest low interest rates were pushed by Dubya and comp BECAUSE it furthered their goals, THE SAME GOALS YOU PREFER!

        I brought up CRA and F/F because ANOTHER poster said Congress pushed pool homeowners on US. Just fighting the fallacy!

        (4) 14 Total Votes - 9 up - 5 down
        • mkaney says:

          “The Austrian School is bogus.” Tell me, oh wise one, which arguments by Rothbard, Hayek, or Mises in particular makes you say this? How long will it take you to find a link on Google for one of those three names that you’ve probably never heard before.

          Why would I prefer low interest rates? That makes no sense. Do you even know what the Austrian School is?! All you can do is speak your anti-Republican speak.. but I’m not even a Republican! You have NO idea what you’re talking about, but keep up with the blog trolling.

          (-1) 9 Total Votes - 4 up - 5 down
          • JonnyB says:

            Sorry Pal, I know all about the BOGUS (some say fringe) Austrian school. I’ve read Ron Paul’s BS! It’s even worse than the Chicago school BS, and that’s saying something!!!

            I never said anything about you being a Repugl, you’re worse, a CONservative libertarian. I honestly can’t think of a worse type of person than someone who buys into that crap!

            BTW, I use Mises quite a bit, it’s where I get my links on showing how Ronnie hosed US on the economy, taxes, regulation, etc.

            BUT THANKS FOR BELIEVING UNLESS YOU BUY INTO YOUR CRAP, OTHERS DON’T UNDERSTAND IT!

            And I’m not a Dem either, I’m an INDEPENDENT PROGRESSIVE!

            (1) 5 Total Votes - 3 up - 2 down
            • r0y says:

              …and yet you still cannot provide an example, just exclamation marks and CAPS LOCK sentences. You are pretty far out there, and reading your replies is both painful (to the eyes) and boring (to the mind). Anyone who resorts to copy/paste replies interspersed with horrible grammar and etiquette-damning capitalizations is just another person to be skimmed over by a good many readers.

              Do yourself a favor, and write something of your own on a notepad or something; edit it, review it, re-edit, etc. THEN post it here. Please. For all our sakes.

              (1) 3 Total Votes - 2 up - 1 down
              • JonnyB says:

                Provide an example of what? That Austrian school is fringe?

                In particular, the Austrian method of deriving theories has been criticized by mainstream economists as being a priori or non-empirical

                From the middle of the 20th century onwards, it has been considered outside the mainstream of economic thought

                LIKE I SAID, BOGUS, EVEN WORSE THAN THE CHICAGO BOYS “FREE MARKETS” BS!

                http://en.wikipedia.org/wiki/Austrian_School

                (2) 6 Total Votes - 4 up - 2 down
                • r0y says:

                  I’ll give the Austrian school of thought this: depending on statistics and mathematical models is NOT, ironically enough, a good way to measure or predict an economy or “runs” – in fact, how often do we hear that the numbers surprised the economists? They revise their data constantly, after the fact – this generally implies that the model is flawed, but that is such a touchy subject with Keynesian economists that they seem happy to just keep revising and updating numbers.

                  In the end, I never believe what any of these “economists” predict, estimate, or say in general. YMMV.

                  (0) 4 Total Votes - 2 up - 2 down
                • mkaney says:

                  That’s right, their method of deriving theories is deduction, not empirical. Economics is not a pure science, it is a social science. It is possible to use empirical data to make some predictions, but it is not possible to use empirical data to create models to use in an attempt to control the outcome. We have seen this time and time and time again, yet economists like Paul Krugman and Ben Bernanke who consistently wrong on, well, everything, refuse to acknowledge their string of invalid predictions and the horrible outcomes of their attempts to manipulate the economy.
                  Most economists are in some way on the payroll of the Federal Reserve, or depend on the legitimacy provided by the Federal Reserve in order to further their careers. This has ensured a bias towards Keynesian economics, which of course governments are in love with because it provides them a cover story for controlling the money supply, which allows them to fund wars and control the flow of money so that plenty goes into the pockets of their cronies, and fund wars without while decreasing the consent needed from taxpayers.

                  (0) 2 Total Votes - 1 up - 1 down
      • The Gimlet Eye says:

        Well said, mkaney.

        (0) 0 Total Votes - 0 up - 0 down

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