As Private Banks Help Themselves, Public Banks could help communities
By Robert Simmons
The short-term, short-sighted approach is a predictable survival strategy in the competitive world of maximization of profits. The private banks constitute the highest predators in this virtual reality. They feed on the real economy; however, like natural predators, they don't provide balance, diversity, or healthy ecosystems. Their constant appetite is not sustainable.
Inflation, profits, wealth inequality, the predatory lending system, credit boom and bust periods, etc., are all naturally occurring phenomena in maximizing profits. They will not be eradicated until we change the bottom-up paradigm where they originated. A National Public Bank--first imagined in the mind of United States founder Alexander Hamilton and then ratified through the Supreme Court and the First United States Congress and Supreme Court--enables growth from the bottom upwards, which will ultimately sever modern economics from its origins in the early ways of oppression.
Simply put, if America needs trillions of dollars of infrastructure, private banks won't be able to help. When struggling communities require capital, private banks won't provide this either. If America requires a financial system to tackle soil degradation, antibiotic-resistant bacteria, everlasting chemicals, mass extinction ecological collapse, global warming, environmental racism, food, and bank droughts, predatory loans, inaccessible housing, low wages or healthcare, green energy options, household and national credit, "big government," massive incarceration, inflation, and ongoing bank failures and bailouts this mechanism won't be private banks.
All the negative externalities mentioned are examples of violence that are part of the profit maximization model. Private banks act as the driving force behind these economic degradations. The destruction of a building creates more opportunities to profit, which is why profit maximization has an internal positive feedback loop. When destruction ceases to be profitable, the losses are transferred to the taxpayer, the worker, and the consumer.
Taxation. Labor. Consumption. Capitalists are the lowest-value component of the whole economic equation. Capitalists are not to blame, however, for marketing themselves as the primary part of the equation; it's up to the rest of us -- who have always wanted the safety and assurance of a higher power to let go of this cozy narrative (that is the reason for most human suffering) and to begin an alternative, more comforting story built on the principles of mutualistic economics and the belief that the power of God is within us all and will grow exponentially as we unite.
National Public Banks are long-term focused public-facing organizations that take any excess cash out of the reach of self-interest that is predatory and invest it to meet the demands of the actual economy. Large banks are short-term-oriented private enterprises that flood the market with excessive debt disguised as cash; the private sector has to wait in the waiting room to determine what consumers will spend their hard-earned cash on. The conclusion is that consumers will always spend their money on necessities. In the wake of their land purchase, Wall Street now holds an overwhelming stake in the cost of housing. Combined with their control over transportation, energy, agriculture, and healthcare. In this way, they can implement their inflationary strategies to extract the most work value from the American citizens.
Wall Street has become too big to control. The only way to keep these big predators under control is for the government to assert its Money Powers and its authority to spend and tax its way towards the general welfare. This will allow us to reestablish our initial goal of the founders of growing America from the bottom upwards through a public-owned bank. A people's bank was created to help strengthen America, starting from the bottom. It can A) help fill the gap in the economy that private banks do not have the motivation to fill, A) fill in the gaps that private banks are unable to fill, B) provide competition to counterbalance profits-maximizing strategies in the private sector, A) provide a level playing field to balance out private sector profit maximization strategies, B) provide low rates and favorable credit terms to small businesses manufacturing, agriculture and other areas of high priority and D) concentrate on long-term prosperity, which in turn will ensure a steady market presence throughout the inevitable boom and bust cycles that are inherent to the short-term profit maximization model that we currently use.
Dodd-Frank Deregulations Reduce Incentives for Small Business Lending
It was 1998 when the Commodity Futures Trading Commission attempted to advise the government about the growing--and completely unregulated--derivatives market; this exchange exposed the quiet complicity between the alleged separate and independent entities of Wall Street, the Federal Reserve, Congress, and the Supreme Court. In the following days, Treasury Secretary Robert Rubin, Fed chairman Alan Greenspan, and President Clinton not only chose to leave Wall Street alone but also initiated efforts that led to an act known as the Commodity Futures Modernization Act of 2000. This law led to the non-regulated credit default swaps that halted the entire Western economy only eight short years later.
After the Financial Crisis, the 2,300-page Wall Street reform act known as Dodd-Frank was swiftly targeted with the help of Wall Street lawyers, who consistently snatched all regulatory teeth from this Congressional Act.
- The Consumer Financial Protection Bureau was meant to supervise the Fed and was eventually an official within the Fed. In the end, however, the Supreme Court somehow found time to rule on the federal agency, saying its structure of leadership is "unconstitutional." (Privately made money can also be unconstitutional; however, it is not a matter of debate since the Supreme Court has never been in a position to issue any decision regarding this matter.)
- The Volcker Rule was supposed to create a new financial barrier between commercial and investment banks. It was torn in 1999 by the Gramm-Leach-Bliley Act. It was also intended to deter banks from betting on short-term speculative bets that will only profit the bank but put the risk on their customers and taxpayers, including the U.S. taxpayer (through the FDIC). However, the rule- approved in 2010 and finalized in 2013- was stalled for a while until 2014. At that point, there was a delay in implementation until 2014. Federal Reserve extended its implementation until the end of 2018 "Regulatory Relieving" Act was passed, which reverted many Dodd-Frank rules. In 2019, the Comptroller of the Currency modified the Volcker Rule to amend it. In 2020, the FDIC lifted restrictions on gambling in banks. Recently, it was reported that it was announced that the Commodity Futures Trading Commission proposed changing the rules for derivatives. In addition, the SEC has weakened its rules regarding companies for asset management as well as The Financial Stability Oversight Council exempts nonbank financial institutions from oversight by the legislature. 2 Importantly, these are the same institutions that strove out in 2010 to implement Dodd-Frank The combination of lobbyists, lawyers, and legal tender convinced them otherwise.
- Title II was supposed to make Wall Street put $19 billion into a huge reserve fund in case they had to crash again; American taxpayers are responsible for bailing out any future major bank problems.
Those with unlimited amounts of privately-fabricated money could have the hiring of a whole army that will serve as a human shield in any conflict fought through words. How can violence not grow from verbal to physical, considering the devastation of individual liberty that profit maximization imposes on the majority of Americans? Eventually, people will directly correlate all violence--insurrection, riots, robbery, school shootings, suicide, addiction, etc.--to the forced imbalance created by the profit maximization model.
In the meantime, research suggests that the level of risk bank holding companies took on following the Financial Crisis did not measurably decrease; despite all the slaps and snarky remarks, private banks were able to evade the new rules and instead make a variety of investment decisions that were not regulated. When predators become hungry and require to be fed, regulations and other barriers can be easily avoided.
Media claims that trillions of dollars were lost during the Financial Crisis. Still, more specifically, trillions of natural wealth were traded from the lowest to the highest. This was an extreme exchange for the majority of Americans. However, since 1975, the distribution of income has diverged to the point that the 1% who are idle have accumulated the sum of $50 trillion, which would have been added to pay for the hardworking bottom 90% of Americans, were income inequality not risen from insurmountable to unbearable 1. (this doesn't even take into account the inequitable taxation of the poorest 90% as when compared to the most wealthy Americans and who are still avoiding this barrier too).
Profit Incentives Give Massive Bonuses, But Little Real World Benefit
Proprietary traders place bets on speculative markets with the help of capital from investment banks. If they fail and lose it, they could be dismissed. The base salary isn't very satisfactory, if at all. The real cash is the bonuses they get in the event that they earn a profit to the banks. During the Financial Crisis, traders averaged $300,000 in bonuses. However, bonuses of up to 15 million dollars were not uncommon. Once traders had gained the trust of banks, they could be granted agreements that paid them as high as 15% of the profits they made, and this incentivized dangerous behavior but also lots of rule-breaking and skirting.
The Wall Street incentive system makes it huge when traders succeed; however, if they lose money, they're not obliged to repay it since they're gambling using the money of their house and not their own. A trader's leverage can be excessive if people need to track it. However, the lack of accountability ty permits one to enjoy the blindness necessary to maximize short-term gains without a thought for longer-term consequences. 3
In the real world, people are in need of food. They require local jobs to help pay for food. They require affordable credit to start small-scale businesses, which will create jobs locally to provide food items. Unfortunately, big banks make more money by gambling than by investing in small potatoes or similar food products.
Federal Land Banks (FLBs) offer loans to ranchers and farmers and are overseen through the FCA (the Farm Credit Administration), a part of the U.S. Department of Agriculture. The Farm Service Agency governs them, and Small Business Administration lenders can help finance the purchase of any farm equipment. In addition, the Farm Credit System (FCS) is in place to assist rural businesses, which include farms, forestry services, fishing, and a variety of parks and recreation businesses. 4
In the same way similarly, the Small Business Administration (SBA) provides a variety of loans to assist manufacturers in boosting production or buying any necessary tools or equipment.
Here's what Americans should learn from this report:
- These banking services are offered by government intervention. Private banks will never take on the risk of investing in these ventures, with the government covering the risk.
- However, small farms and companies have to be able to meet "specific requirements" to be eligible for assistance. Farmers must be in operation before they can apply for funding; however, new farmers will only be able to get financing if they join forces with farmers of a previous generation who lend them money once they're established. Manufacturers must show three years of annual sales exceeding $2 million to be eligible for loans; smaller producers are also in a bind.
There is an unfunded financial gap that banks from the private sector need help to solve. The government is taking taxpayers' money and putting it into small-scale businesses that generate employment and cater to the general well-being of the people they support. Like every other time, the government has to provide subsidies to the private sector to accomplish a task, and the private industry does not have a personal motivation to do so. The private sector bank is an intermediary in situations where there is no need and wastes taxpayer funds. Manufacturers and other small companies require affordable credit, and private banks aren't required to provide it unless tax dollars "incentivize" the banks to offer it.
In the meantime, with various subsidies to big energy, agriculture, transportation, or energy companies such as transportation, the government has effectively hired wolves to look after the sheep. They are bound to grow too large to fail since no one else can perform the task. Competition is driven out of business as subsidies are an incentive for large enterprises to maintain their prices at a reasonable level, which makes smaller companies unable to compete with prices. The government is simply paying for the gap between overpriced costs and the re, reasonable price, and somehow, the government believes that it is a win-win situation for both the Americans and the American people, but the payoff for the government comes out of the pockets of taxpayers. Subsidies are supposed to help new companies rather than exacerbate the problem of:
- Already oppressive wealth inequality.
- An already unfair competition for capital access.
- This hinders local communities from climbing up without paying the high-interest rates of private banks.
The U.S. Small Business Administration was created (in 1953) to serve as a resource and advocate for American entrepreneurs and small-scale business owners in the local area. It is similar to Fannie Mae or Freddie Mac. SBA operates as an autonomous government entity, meaning the executive power cannot direct it. Unfortunately, it is not immune to the influence of the private sector.
Within and between the FSA and SBA, loan guarantees and loans total more than $75 billion. Private banks reap the benefits, while taxpayers are at risk. The American taxpayer is the one who guarantees 75 billion dollars worth of loans, and private banks take the interest earnings on money that is worthless without the backing of the federal government to protect it. This brings up a straightforward question: why do private banks sell public funds, particularly since they have no obligation to support the public interests? Whatever the flaws in government, however, they have always been attentive to safeguarding the public more than companies in private. This is ineffective because it decided to demolish the National Public Bank and instead function as an over-extended and financially burdened backstop for all the damages incurred by the private sector's profit-maximizing.
Alexander Hamilton's National Bank Solution
Although it is not often discussed, there exists an American School of Economics 5 (also known as"the "National Systems") that refers to the philosophies of American founders such as Alexander Hamilton and John Adams (or later, Abraham Lincoln), who believed in a centralized government was necessary to ensure stability in and stabilize the U.S. economy and ensure the welfare of all American and every American; this belief is evident by the Constitution they drafted and also upgraded America from an unorganized confederation of states to a sovereign nation. The instrument chosen to boost the general welfare and unite the colonies was a national public bank that facilitated the development of productive businesses like manufacturing, agriculture, and industry. It also functioned as a "development" bank to fund the infrastructure to support all international and national U.S. economic exchanges. In addition, it accounted for all the debts that colonies incurred during their struggle for independence.
A second pillar of this particular school was what came to be referred to as "protectionism," a two-prong strategy that imposed moderate tariffs on imports. They could then be used to give government subsidies (originally called "bounties") to aid in the growth of manufacturing, agriculture, and every form of invention. This type of efficient, circular economy that was a part of the People's Bank was meant to bring the fortunes of Americans together -- to swim or sink as a single nation, a wholly connected uniting organism.
Unfortunately, the personal economics and social ramifications associated with slavery stood against a unified total; they preferred a loose confederation of states. Why? They sought to increase their profits through slave labor and only sought unification when it served their interests. Instead of adopting the economic growth strategy that earned America independence, the wealthy enslavers, land barons, and other medievalists chose to constantly bring the country to the brink of collapse with their quick thinking, requiring government intervention. Clearly, the Financial Crisis of 2007- 2008 was not an outlier but an established American tradition, based on the illegal Privatization of U.S. Money Powers.
Privatized loss from this American School of economics has permitted the wealthiest to be in control of the government-backed U.S. money creation, tax dollars from the government, subsidized innovations, as well as the slow privatization of our overall welfare system: education, healthcare housing, agriculture transport, energy, and retirement security, among others. In biological terms, wealth inequality is the unsustainable extraction of our vital economic power that is not money but American labor. It is the sole true factor in an economic calculation. Money is a fictional product that has always been utilized by those who created the money to take labor from people who don't. This is why the initial federalists wished for everyone in the People to have their Money Powers.
The inelastic demand for essential human needs is the leading cause of inflation. It is a deliberate strategy to increase the amount of labor and the profits that result from it. When the wealth inequality cycle is in place, all kinds of violence are profitable. As our government subsidies and privatizes these negative externalities, there will never be an ending to violence: war, prison addictions, poor health, and war as well as police violence, suicide, and homicide, and a long list of negative externalities of profit maximization can be overwhelming, and no amount taxpayer money will be able to buy enough solutions that can fix the problems. There is a need for a "Plan B."
Privately produced money is debt-based, meaning it's printed before it can have any value. It has no value, as only American labor can create value. As this money is circulated through the economy and subsequently absorbed into the economy, tactics of inflation such as economic rent or price-gouging are employed to pick all the currency left before the actual labor can pay to repay the loan. Even though this "debt" will eventually be canceled in bank books, it is not because the loan was securitized and repurchased before its creation and mortgage payments are routed towards Wall Street, meaning that the value of the labor employed to repay the loan is not "destroyed" but instead channeled towards Wall Street investors. Debt funds always rise to the top, causing the lowest-paid wage earner to beg the private banks for additional debt money that is not real and only prolongs the spiral of credit. America is currently in debt of 34% trillion dollars in National Debt and $17.3 trillion in household debt, which includes credit card, mortgage, and student debt (a trillion is hard to comprehend simply by adding 12 zeros on that 34).
The place where the ideas of the federalists like Alexander Hamilton and enslavers like Thomas Jefferson intersect is the notion that America should be constructed from scratch, as Jefferson rightly saw basic economic exchanges that take place on a community level.
A National Public Bank, as proposed by Hamilton and later adopted by Jefferson, is needed to ensure that everyone who can create economic growth- through their dual roles as laborer and consumer- is rewarded for their work. Through filtering American labor through the National Public Bank, money will become just that: the product of effort which would make work the gold standard on the basis of measuring prosperity. This would halt the production of money that is not needed, which is simply dating the money that is already in circulation within the economy and causes inflation, which can be more easily understood as a subtle devaluation of our value as workers.
The overall welfare will be most effectively served when everyone is offered the same opportunity to participate in and benefit from the rising tide they build. This can tie our lives together, and when each community is successful and prospers as a result, the pie will grow for all of us. The rational self-interest strategy is a way to survive in a world that is characterized by disconnection or lack of unity. Biologically, mutualism has consistently outperformed predation, parasitism, and our current methods, which we call "competition." Still, it is a subtler type of violence involving forced economic conflict, where there is no reason to do so.
Public Banks as Agents for People and Communities
Agent banks handle the financial and cash transaction requirements of individuals or companies that employ them. National Public Banks can establish deposit accounts for small-sized companies and entrepreneurs across the community to fund U.S. commerce. They can then handle their financial requirements using low rates and reasonable loan conditions. As an intermediary for communities, bank branches can assist in managing the loans they issue and ensure that loan payments are covered by establishing deposit accounts.
At present, SBA loans attempt to offer the most affordable rates currently available. Still, they can also fluctuate in response to how the Federal Reserve, the loan amount, or the private lending partner is used. In the meantime, the federal government has come up with programs such as those offered by the Minority Business Development Agency (MBDA) as well as the Economic Development Administration (EDA) to aid communities that are struggling in the aftermath of the collapse of COVID-19. National Public Banks would offer the stability needed to survive any natural disaster, crisis, or profit-driven cycle of economics; however, most importantly, they can aid communities currently in distress, the six most vulnerable to these privately owned economic turbulences. The communities are the organs in the bigger body that we call The United States. Unless we improve these essential organs' immune systems, the whole body is at risk. It's time for preventive treatment, not treatment after the fact. Although triage can ultimately be profitable for those who own Band-Aids, it is an additional negative externality in the uncompromising world of profit maximization that we choose to traverse.
Private banks seek short-term profit for themselves. National Public Banks seek long-term prosperity for all, as per their mission to improve the general welfare of the population. Giving out welfare checks is not only insanity and is specifically focused (not "general"), however, it also creates a recurring gap that taxpayers are required to climb. The general welfare can be better provided by providing opportunities for communities to strive towards their financial security. In giving communities the ability to control their essential and affordable needs--food, shelter, water as well as education, health and preventive health care, green energy, communications, and transportation networks as well as waste management, etc.--a direct link between work and prosperity could become established (something our ancestors referred to as "the American Dream," however, it has lately been reduced to a progressively smaller portion of Americans).
The profit maximization model that shaped how Wall Street was conceived is based on the belief that there's a way to prosper without needing to work. This isn't a modern rendition of the American Dream, but the reason for the idea first formulated by early oppressors. Because of the trauma that transgenerationally has endured by the oppressed, the oppressed have either chosen to remain in a state of oppression or rise to take on the role of oppressors. The profit maximization system, based on the hierarchical economics of earlier religious oppression, creates oppressors as well as those who are even oppressed. However, loving our neighbors cannot change the reality of the current economic structure.
Every community must have a basic infrastructure to provide affordable essential needs. Small businesses require funds. Communities in crisis require funding. We require an
A clear strategy to tackle the issue of pollution, the collapse of ecosystems, global warming and environmental racism, food and bank shortages, predatory loans, affordable housing, insufficient wages, household and national debts, "big government," mass incarceration, and a myriad of other issues that provide evidence of our reckless ways of securing the liberty and overall well-being of the American citizens. Maximizing profits is only a survival strategy for the short term without a long-term outlook for our survival. How long will we have to open this wormhole further down the road? The idea of a National Public Bank would help mathematically eliminate the inequity in our current economic system. Think about it. Better to start sooner than later.