As an alternative to Wall Street’s predatory lending, every state and large city should charter a public bank, modeled on the Bank of North Dakota, whose first and only goal is to serve its people. Also, like many other developed nations, the United States should adopt postal banking to provide fair and accessible financial services via the U.S. Postal Service.
From Runaway Inequality: An Activist's Guide to Economic Justice
Wall Street deregulation let the genie out of the bottle. Wall Street now dominates the economy. Corporations have been financialized and inequality is accelerating. How do we regain control over out-of-control Wall Street? In this chapter, we’ll look at reforms that would bring a semblance of fairness and justice to our society.
To stop the financial strip-mining of America, the root cause of runaway inequality, we must drastically change our banking system. There is no shortage of proposals for taming Wall Street. Some advocate restoring the Glass-Steagall Act, which would prohibit regular federally insured commercial banks – the places where we put our money – from also being investment banks that speculate. Others advocate breaking up large banks into smaller private banks to increase competition. And still others say that we should have nationalized the large banks after the collapse, instead of bailing them out. Far better to have government own these big banks than private behemoths with a record of running roughshod over us.
An intriguing version of that last proposal is being played out right now in an unlikely place: North Dakota.
Why is socialism doing so well in deep-red North Dakota?
North Dakota is the very definition of a red state. It voted 58 percent to 39 percent for Romney over Obama. It has a Republican governor and Republicans dominate its state house and senate (104 Republicans, 47 Democrats). The state’s Republican super-majority is so conservative that in March 2013 it passed the nation’s most severe anti-abortion bills. But North Dakota also is red in another sense. It fully supports its state-owned Bank of North Dakota (BND), a socialist relic that exists nowhere else in America. Why is financial socialism still alive in North Dakota? Why haven’t North Dakotan free-market crusaders slain it? Because it works.
In 1919, the Non-Partisan League, a vibrant populist organization, won a majority in the North Dakota legislature and voted the bank into existence. The goal was to free the state’s farmers from impoverishing debt dependence on the big banks in the Twin Cities, Chicago and New York. More than 90 years later, this state-owned bank is thriving, providing reasonably priced loans for community banks, businesses, consumers and students. It also delivers a handsome profit to its owners – the people of the state of North Dakota (all 700,000 of them). In 2013, the BND replenished the state’s coffers to the tune of more than $94 million. “It is more profitable than Goldman Sachs Group Inc., has a better credit rating than J.P. Morgan Chase & Co. and hasn’t seen profit growth drop since 2003,” writes the Wall Street Journal.
What if California, with its huge economy, decided to create its own bank? The state would be looking at an extra $4 billion a year in revenues that could fund education and infrastructure. Some people say that BND’s success is just the fortuitous outcome of the state’s oil shale boom. But as financial writer Ellen Brown points out, the boom didn’t start until 2010, long after the Bank of North Dakota’s profit streak began. No, it’s not so easy to explain away this populist bank. It really works because it is a real bank and not a casino and because its aim is to address public needs, not enrich private owners.
Proposal: Let’s create 49 more state banks to match the one in North Dakota. And give every large city its own bank as well. That’s a way to directly challenge the financial power of Wall Street.
Leopold, Les. Runaway Inequality: An Activist’s Guide to Economic Justice (p. 261). Labor Institute Press. Kindle Edition.