The Public Option in Banking: How We Can Beat Wall Street at Its Own Game

President Obama has repeated his call for a public option in health care, in order to create some competition for the insurance companies and keep them honest. We the people need to call for a public option in banking, in order to create some competition for the private banks and keep them honest.

In Wall Street's latest affront to the public trust, the nine mega-banks graced with $125 billion in taxpayer bailout money under the Troubled Asset Relief Program (TARP) were reported last week to be paying out billions of dollars in bonuses to their executives. At least 4,793 bankers and traders received more than $1 million each in bonus payments, although it was one of Wall Street's worst years on record. After months of investigating banker compensation, New York Attorney General Andrew Cuomo said on July 30:

"The repeated explanation from bank executives that bonuses are tied to performance in a manner designed to promote (national economic) growth does not appear to be accurate."

To say that it was an understatement would be an understatement. The bonuses paid to executives not only were not tied to national economic growth but were not even tied to some reasonable percentage of company profits. In fact they were generally greater than the net income of the banks. Morgan Stanley, for example, had $1.7 billion in earnings and paid $4.475 billion in bonuses. Goldman Sachs had $2.3 billion in earnings and paid $4.8 billion in bonuses. JP Morgan Chase had $5.6 billion in earnings and paid $8.69 billion in bonuses. JP Morgan's largesse involved showering 1,626 of its favorite execs and traders with bonuses of $1 million or more. For most people, a "bonus" is a few hundred dollars at Christmastime. A million dollars is what you work a lifetime to try to save, and few people reach that goal. Even Citigroup and Merrill Lynch, which have been called zombie banks, paid $5.33 billion and $3.6 billion in bonuses, respectively -- although they lost more than $27 billion each in earnings. The bar for merit is apparently so low that you're entitled to a bonus if your zombie bank simply keeps breathing!

These blatantly inflated bonuses are just the last in a litany of abuses by those same profligate banks that nearly destroyed our economic system. If the derivatives on their books were "marked to market" (valued at what they would fetch on the market), the banks would be bankrupt, and their employees would be out of a job. Instead, they have been allowed to inflate the value of their "toxic" assets -- and sell them to the U.S. government at the inflated value. Then they have taken the money they got from the government at these inflated prices and paid back the TARP money they received -- allowing them to post inflated earnings and reward themselves with inflated bonuses! Many people feel that these bankers are thieves stealing from the public till who should be looking at jail time. But who is there to stop their parade of outrages? No one in Congress, the White House, or the news media is calling them on the carpet for it. As Senator Dick Durbin said recently, Wall Street owns Congress; and that is also true of the major media.

We may not be able to stop them, but we can join them. We the people need to play the bankers' game ourselves. Even corporate giants such as General Motors and WalMart have now gotten into the banking game and are easing their credit problems by forming their own banks. The U.S. public sector is late to the party. States, counties, public universities could take the lucrative system the private banking industry has created for itself and turn it to productive use in the public interest.

Keeping the Banks Honest with Some Public Competition

In President Obama's July 17 weekly address, he repeated his call for a public option in health care, in order to "increase competition and keep insurance companies honest" and to "put an end to the worst practices of the insurance industry." The same call needs to be made for a public option in banking. In some countries, publicly-owned banks have operated alongside privately-owned banks for decades; and in those countries, the current crisis has served to show that public banks generally do a better job of serving the people and protecting their interests than their private counterparts.

In Canada, the trendsetter in public banking is the province of Alberta. Alberta's publicly-owned banking system, called Alberta Treasury Branches or ATB, was initiated during the Great Depression to give the private banks a run for the public's money. According to a government publication titled "These Are the Facts: An Authentic Record of Alberta's Progress, 1935-1948":

The Treasury Branch system enables the people to pool their financial resources and to use these resources for their mutual benefit thereby enabling them to progressively free themselves from the stranglehold of the existing financial monopoly. These Treasury Branches provide effective competition for chartered banks thereby ensuring banking services at reasonable rates.

From 1929 to 1933, the average annual income in Alberta had fallen from $548 to $212, a staggering 61 percent drop. Interest payments continued to bleed the farmers of cash, and taxes had increased. In 1935, Albertans decided they wanted a change and swept the Alberta Social Credit Party into power. In 1938, the system of Alberta Treasury Branches was set up literally as a branch of the provincial government. The stated goal of the ATB was to "provide the people with alternative facilities for gaining access to their credit resources." Bankers initially scoffed at Alberta's attempts to establish a competing economic system, but Albertans had high hopes and rushed to deposit their meager savings in the Treasury Branches. The government invested in the ATB only once, contributing $200,000 in 1938. That was all that was necessary, as the system was self-funding after that. By 1946, the ATB was turning an annual profit of $65,000. According to a booklet titled "Albertans Investing in Alberta 1938-1998," by 1998 the ATB had remitted $68 million to the provincial government.

In India, public sector banks also operate alongside private sector banks. Privatization has made significant inroads into India's banking system, but fully 80 percent of the country's banks are still government-owned. Before the current crisis, neoliberals criticized India's public banks for being oriented more toward serving the customer than turning a profit; but studies showed that the public sector banks were out-performing the private sector banks in terms of customer satisfaction. Today, when the credit crisis has hit the aggressive private international banks particularly hard, customers are fleeing into the safety of India's public sector banks, which have emerged largely unscathed from the credit debacle. The public banks have been credited with keeping the country's financial industry robust at a time when the private international banks are suffering their worst crisis since the 1930s.

In China, private-sector banking has also made some inroads; but state-owned banks still predominate. In a June 2009 article titled "The Chinese Puzzle: Why Is China Growing When Other Export Powerhouses Aren't?", Brad Setser noted that nearly all countries relying heavily on exports for growth have experienced major downturns and remain in the doldrums -- except for China. When China's external markets fell off, the government turned its credit machine inward to domestic development. Its state-owned banks engaged in a huge increase in lending, with local governments and state enterprises borrowing on a large scale. The result was to create a real fiscal stimulus that put workers to work and got money circulating again in the economy.

In the United States, the trendsetter in public banking is the state of North Dakota, which has owned its own bank for nearly a century. North Dakota is one of only two states (along with Montana) that are currently not facing budget shortfalls. Ever since 1919, North Dakota's revenues have been deposited in the state-owned Bank of North Dakota (BND). Under the "fractional reserve" lending scheme open to all banks, these deposits are then available for leveraging many times over as loans. Other banks in the state do not see the BND as a threat because it partners with them and backstops them, serving as a sort of central bank for the state. BND's loans are not insured by the Federal Deposit Insurance Corporation (FDIC) but are guaranteed by the state. North Dakota has plenty of money for student loans, makes low-interest loans to startup farms, has the lowest unemployment rate in the country, and is generally not feeling the pinch of the credit crisis at all.

Theory and Practice: The Proof Is in the Pudding

A bank charter brings with it the privilege of creating "credit" simply as an accounting entry on the bank's books. The flaw in the private banking scheme is that banks create the principal portion of their loans but not the interest, which is continually drawn off the top as profit. New borrowers must continually be found to take out new loans to create this extra profit, making private banking effectively a pyramid scheme; and like any pyramid scheme, it has mathematical limits. Today, those limits appear to have been reached. Personal and national debts have gotten so large relative to incomes that it is no longer possible to maintain the fiction of solvency. We soon won't have the money even to pay the interest on our existing debts, let alone to incur new ones. Public banking does not suffer from that flaw, because interest is not drawn out of the system but is returned to the public coffers. Public banking is thus mathematically sound and sustainable.

That is the theory, but there is nothing so persuasive as putting it to the test. Like with the public option in health care, we need to pit the public banking option against the private banking option and see which works best. My money is on the public option.

 

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Comments

[Dick Distelhorst]

On the surface the idea of having states join the present privately-owned, debt-based banking system so that the state banks could also create debt-money "out of thin air" sounds good, but the fact is that banks can only create new money in the form of interest bearing debt. Which means that the state banks would not only be validating the present unjust and immoral banking system by joining it, the only result of state banks loaning more debt-money into circulation would be to put our nation even deeper in debt. Certainly not what we need to have happen.
What the so-called "too big to fail" banks don't want you to know is that all of their money was created in the form of debt, and when they can no longer create more "debt-money" it will disappear as the debts are paid or defaulted, which means we will have to replace their debt money by spending real U. S. dollars into circulation.
Then we will finally get the benefits we should have received in the first place - and all these benefits come without debt, without taxes, and without inflation. It will be a permanent money supply, not temporary as the present bank-created "debt-money" which disappears when debts are paid. The American Monetary Act IS the way out of the present recession.
Click the link below to read the American Montary Act
www.monetary.org/amacolorpamphlet.pdf
Dick Distelhorst, Burlington, Iowa

[Dick Distelhorst]

On the surface the idea of having states join the present privately-owned, debt-based banking system so that the state banks could also create debt-money "out of thin air" sounds good, but the fact is that banks can only create new money in the form of interest bearing debt. Which means that the state banks would not only be validating the present unjust and immoral banking system by joining it, the only result of state banks loaning more debt-money into circulation would be to put our nation even deeper in debt. Certainly not what we need to have happen.
What the so-called "too big to fail" banks don't want you to know is that all of their money was created in the form of debt, and when they can no longer create more "debt-money" it will disappear as the debts are paid or defaulted, which means we will have to replace their debt money by spending real U. S. dollars into circulation.

Then we will finally get the benefits we should have received in the first place - and all these benefits come without debt, without taxes, and without inflation. It will be a permanent money supply, not temporary as the present bank-created "debt-money" which disappears when debts are paid.
The American Monetary Act IS the way out of the present recession.
Click the link below to read the American Montary Act
www.monetary.org/amacolorpamphlet.pdf
Dick Distelhorst, Burlington, Iowa

[AMEREURO]

Ten more reasons why it's a non-starter:

1. No single bank can multiply its deposit base by 10 or 12 times; only the banking system as a whole does this, over time.

2. No bank can 'lend' any more than other banks, otherwise they'd drain their reserves to other banks.

3. The same flaws apply to all banks, private or public; both distribute money back into the system, but only by getting society deeper into debt.

4. Any returns would only be a small % of State budget shortfalls.

5. States would have to issue extra bonds to raise capital, putting extra burdens on taxpayers.

6. Taxes are collected for spending on public services, not for putting in a piggy bank.

7. Other banks could bring down a State bank, if they wanted to.

8. States could get better deals from existing banks instead.

9. 5 States in Australia sold their banks in the 1980s and 1990s - they weren't cash-cows, taxpayers are still paying for losses.

10. The real solution is to stop creating money as debt and demand that the U.S. Government fulfill its constitutional responsibility to supply the nation with money, as per the American Monetary Act (see www.monetary.org).

[BobBeresford]

You have no idea what you are talking about and are wrong on at least 8 of the 10 points. And are therefore just misleading people.

1 -Different Fractional or Deposit Ratio systems have been used in America. Originally, a direct multiplier was used ( 1816 - 1836 ) where they could create 10 times the amount in paper loans that they held in gold. That got turned into a situation in the 20th century where they could multiply out retail loans in the same 10 to 1 way, but based on paper money loaned to them directly from the private Fed - which is therefore imitating gold/value with its paper. But they could also relend money received on private deposit as long as they held a % of it on hand. Often 8%.

The continual relending , by the retail banking system, while holding a % each time does multiply the money supply within the whole system ( what you're trying to repeat here ) - probably 6-10 times. But that's only part of the leverage.

Since then, American banks have dropped those protocols and over leveraged, subject only to a token reserve requirement - as checked by agencies like the Fed and FDIC.
But then in 2004 the Swiss/International BIS Basel 2 accord came in ( possibly slowly in USA ) and the new protocol now is that banks can create loans at will, but subject to balance against an 8% minimum value held in Tier 1 Capital.

[BobBeresford]

.........T­ier 1, is their most 'real' wealth and includes solid and tradeable assets ( eg money, real estate and own cash ) and also Share issues.
So of course it encourages banks to float/sell shares....­they can then lend out 12 times the value.

So it's clear that States can form banks that follow that protocol much better than private banks, because they have so much in Real assets to lend against. And they don't need to make profit or evict people in difficulty - they would exist to serve the community. They would lend mainly for productivity, funding useful business and state infrastructure and could also fund state/public salaries till the system was rebalanced - perhaps by a different tax setup. California needs more taxes, but with productivity - including state building programs - enough tax revenue might even arrive back without having to raise income tax....tho­ugh California is famous for being undertaxed overall.

Otherwise, the combination of apathy, unemployment and welfare dependance ( and drugs and crime ) becomes a death spiral that ruins the state. But Vision and public banking can get you out of the mess and solve the huge foreclosure problem Cal faces. State banks would simply purchase the mortgages ( pref at real market rates - even forcibly ) and then reschedule the payments. And if necessary could later take partial equity in a house and even charge small partial rent.
But the state does not want to evict its own citizens..­....unlike the private banks.

[Artos]

Yeah, there are people even now doing just that, but they are the wrong people. They decry government control because they are of like mind with those who have been robbing us, they just resent the rest of us for trying to impede their rush to wealth and power. They say that the Government is the enemy, not admitting that our government is owned by those they would align themselves with, the Corporations. Those like Geithner, Summers and Paulson work from within the Government doing the Corporations bidding as well, each damaging the Government and successfully achieving the aims of the corporations. Cheney was the ultimate Corporation fifth Columnist. He didn't care one wit for the safety of Americans, he cared to further the wealth of his Friends in the Corporations. So those wicked people you mention don' just work within the government they are also those who rabble rouse against the government so they can destroy the government and it's ability to regulate the Corporations.

[AMEREURO]

"We may not be able to stop them, but we can join them. We the people need to play the bankers’ game ourselves.­"

This is so wrong on so many levels; moral, tactical, technical and practical, ... to name but a few.

If a bunch of criminals start trashing your house, do you shrug your shoulders and join in?

If what has been a mortal enemy to humanity is weakening, why send them reinforcements?

If your supporters are being bleed to death, do you open up another wound in them?

If you're cutting back services and shedding staff, are you in any position to start a new business and hire new staff?

This is about the 14th article from this writer that mentions State governments owning banks. This is not a solution, it's the exact opposite of a solution. It's the financial equivalent of trying to put out a fire with gasoline.

This 'idea' misses the point completely. What will it take for people to learn that you can't solve a problem with more of the problem?

States getting into banking is a ludicrous suggestion for so many reasons.

The most obvious being that it 'serves to protect' the status quo. The result: it would help the banking system that is destroying people's lives every day to carry on, as is. If you don't understand this, then you don't understand how the banking system operates.

The solution is to change from debt to money - just money (see: www.monetary.org).

[Artos]

I agree with you , She has no concept. For one thing most of the States right now are hard pressed for cash, and starting Banks would be downright impossible. How would they get their startup cash. They would either have to Borrow it, raise taxes to get it or try to convince the public to join in order to get enough in the coffers to commence operations. Then who would borrow the money from them. If the Public Bank ran true to form as most banks do, then it would be the Corporations and the Well heeled who would get to borrow the most since they have the most collateral available to back up their requests. I do not see this as a great option. Instead I recommend we take these Corporations and Banks down a few notches by withdrawing our support. We stop spending with them and we stop banking with them. That is our real power. Buy locally from local producers and manufacturers who keep all of their own needs in house as well. Drain the Big Shots dry and lets see how long they last without our business. They screwed us, now it's our chance to return the favor.

[BobBeresford]

The issue here is that like most people you don't understand how the banking/financial actually works. Miss Brown understands it very well and is putting solutions that are probably the most workable now.....si­nce the Money Elite owns your federal gov ( I'm in NZ ). States and cities can easily start banks based on their assets and revenues - and conform to the BIS rules better than private banks can do it. So it doesn't matter what the Fed thinks - they'll not be keen - the best thing at moment is small scale public banking...­.while you still can. Note that all retail banks create new money, on loan cycles, but are limited to how much is created - based on their reserve holdings ( now it's 8% as Tier 1 capital ).
This doesn't mean small scale public banking is political separatism - it isn't.
Supporting local industry -as you say - is a good thing.

[BobBeresford]

Unfortunately you have no idea how the financial/banking system actually works - but at least good that you've mentioned the AMI American Monetary Institute at monetary.org because that has some clued up people. Miss Brown is obviously clued up as well, and well researched.

State banking is not ludicrous. North Dakota already does it successfully, and quite conservatively. They're one of the few states not in financial difficulty.

Society as standing needs the money to keep flowing, and some form of banking system.... and public banks have the potential to do this far better than private banking - which is your national/Federal Reserve controlled system. It is actually unsustainble, and canibalises the economy due to compounding Interest etc.

[socialtalker]

i dont pretend to know anything about a different banking system, but look, we have 50 states and a few territories and a district. now reason why some of them cant test it out. especially developing currencies, a local countries have state/local currencies.

[BobBeresford]

Excellent article, and it just shows how what ought to work - if you think through it properly - really has and does work in reality...­....and in different countries. I'm one of those Free Market types who believes in enterprise and doesn't like bureaucracy. But I'm now sure that there has to be a Gov ( eg Fed/state/ even county ) keeping the money supply flowing and stable. That also means controlling/owning banks and only the State should be able to charge Interest.

With National/State banking there's better options. Since they are there to serve the people they would avoid foreclosur­e.....inst­ead altering debt and payment schedules and even taking part equity in a house/business. Which also means gov/state employed experts could then assist with solvency.
By contrast, private banks turn feral in a depression and canibalise the economy, since their mission is to make money off money at any cost. They help liquidate the country.

The money supply is very powerful - everything else rides on it , and it is easily manipulated to alter values. Gov must defend its citizens from money manipulation- eg the housing bubble/bust scenario now being used to destroy America. A massive bubble/debt deflation has been set up, with terrible social consequenc­es....mass­ive foreclosure.

Really, this is now a battle for America's survival..­..or dissolution as a nation state.

[Artos]

Yeah dissolution is exactly what the separatists have been hoping for and praying for. It looks like their dreams have come true.

[AMEREURO]

Take a moment to really think about it - I'm not sure you see the full ramifications of this proposal:

Q. What is the one thing the 'Masters of the Universe' don't have?

A. The ability to directly, officially, advise our government on what policies to pursue and what laws to implement; i.e, the ability to actually be inside our government - to eventually become our government!

Sure, big banks have enormous influence now, even only as lobbyists outside officialdom, but can you imagine the raw power the banking system would wield if it ever got its foot in the door within officialdom?

Please realize that getting governments into banking is the direct route to letting the banking system rule every aspect of our lives? Cementing the system in place, while the world goes to Hell. This is the goal - this is the 'end-game'.

The United States of America would become the United Banks of America.

And as America goes, so goes the world.

[BobBeresford]

You have so little idea what you are talking about that you are only adding confusion to the discussion. You need to learn a bit about the history, and how money and finance really works. Many others ought to make that effort too, but at least they aren't posting long waffly abstractions on this site.

In fact, the Masters of the Universe are already inside your government, and/or pulling the strings. They own and control both main parties to the extent that going underneath the radar with state/city/county etc public banking looks like the best option, now, of stabilising the money supply and saving the country.

When the state owns banks it is the ( dangerous ) private cartel that loses power.
The - Private - banking system already does rule most aspects of your lives. The public system would give more options, freedom, and not throw you out of your house so fast.

[tekkmerc]

Right on. My money's on the public banking option, too.
Get these Big Bank fatcats off their free ride and back in the homeless shelters where they belong...

[tekkmerc]

Right on. My money's on the public banking option, too. Get these Big Bank fatcats off their free ride and back in the homeless shelters where they belong...

[pm247]

Thank you so much for this article and your excellent follow up comments.

Bring on the Public Option. I would much rather see my interest payments go into the Treasury than into some crooked executive's yacht fleet or collection of mansions.

[JereLHough]

Hear, hear! That is the heart of the issue! With interest money going into public treasuries instead of enriching banksters, taxes could be dramatically lowered. Multi-trillion dollar taxpayer bailouts would no longer be on the table, or even possible. The national debt could be eliminated.

Read Ellen's book, "Web of Debt" for the real scoop on the costs to our civilization of privately controlled banking.

http://www.webofdebt.com
http://wealthmoney.wordpress.com

[MunnyFarmOrg]

Sorry… its hard to solve the worlds problems in 250 words! ;>) so…

PART 1 OF 4…

John Kenneth Galbraith… "Under capitalism, man exploits man. Under communism it's just the opposite."

YOU ARE ALL MISSING THE 3RD OPTION!

Thank you so much for another AWESOME article Ellen! And your excellent comments! Such as explaining the truth about the “divide and conquer” man v. man “investment” gambling scheme too. (When the roosters’ heads are rubbed together so they willingly engage in a cockfight to the death, the fox’s mission is easier to accomplish!)

And especially thank you so much for including other examples of Public banks internationally, besides just ND! Expanding a Public banking system might not only cause interest rate competition, but competition in the fine print of “loan” contracts too!

So not only am I 100% with you on the Public bank options, I don’t think you are proposing far enough improvements in that option either. If States offered full service COMMERCIAL online accessible banking, expanding the money supply would not only boost the economy, and the profits (if any) could be used to cut taxes, but the Private banks and Credit Unions would have more qualified “borrowers” to “lend” money to as well. A “non-vicious economic expansion circle.”

[MunnyFarmOrg]

PART 2 OF 4…
But Money As Debt, is still a flawed and limited system! How many hundreds of millions of us world wide are living in poverty? The more money and assets persons have, the more (monetising assets) “credit” they can borrow, so Private bankers can make more profits with Public bank options! Public Commercial bank options have great mutual benefits, but there is another option!

Please consider, …for everyone who says “get the politicians to fix the system”, by the systems’ design, what if the foxes have no option but to guard the hen house? Wouldn’t it be more rational if we just set up another secure hen house? (Even the roosters would not have to be instigated to fight it out for their “leeching” investment­s.)

Since you brought it up, remember the Nazi’s were elected! Just because individual politicians may have been democratically elected, does not mean that ANY laws are democratically approved by those who “chose” the representatives!

And more importantly! … is no proof that there is a constitutional section or amendment that guarantees national security protection, including a checks and balance system to prevent totalitarianism!

[MunnyFarmOrg]

PART 3 OF 4…
Government laws and decrees are enacted without a court (and an appeals process) approval system, that every section in the Act, meets all sections of the constitutional agreement. Or even that any proposed law must be ratified by the citizen voters! Or at least the voters can collect enough votes in an online petition to stop the enactment. …With online voting (with tamper proof security systems) it would be possible.

A Public Bank option system is a great option. Just like single payer health care by a government or a co-operative puts people before profits, which removes the profit motive to create efficiencies by cutting any possible peoples’ benefits (expenses), to create more profit, and more bonuses for the executives.

But like the Nazi’s, unless there is constitutional protection, (or the ability to jump from one State to another, such as neutral Switzerland to do your banking, and surviving) there is no guarantee that any FUTURE government (even with a Public COMMERCIAL bank) would act in you or “We the peoples’” best interests!

It may be better to fight the war on more fronts than just one! Millions of us are living in poverty and dieing because of a lack of money! (To cite my case… Human (and our machines) and our Earth’s resources vs. the International Banking system… “Water, water, everywhere, but not a drop to drink!”)

[MunnyFarmOrg]

PART 4 OF 4…
WHAT’S THE 3RD OPTION?
An international Co-operative, in which we as members agree to create and distribute our own “complementary currency.” Every member who joins for free, is given a lifetime allowance to spend into the economy, to benefit themselves and others! (As the money is spent and passes from member.) So when each person joins us, for them, poverty is history!

And as a Co-operative, our online computer (including cell phones) system, creates and distributes incentives to cause members to contribute more to our economy, and incentives to cause our (cell phone, POS, and online transferable) currency, to be the chose one to use!

We are almost ready to launch it, anyone want to be a member and/or contribute? What if we even pay you in US $, with an exponential compound interest growth system, to promote it?

[DrKrbyLuv]

Ellen is providing answers to the greatest problem of our lifetime - the financial collapse of the west. I keep wondering why her ideas do not take more traction and I suspect it is because there is a preconceived notion that solutions can not be simple for complex problems.

This is especially true in national monetary systems where the scams are glitz-ed up with confusion and double speak all in an effort to make people give up on ever understanding the fundamentals. It really is not as complicated as we've been led to believe - our monetary system is simply a scam.

It will be much easier for us to work at the state level as we are closer to the PTB and states; unlike Washington, must balance their budgets. Tax revenues are dropping and states are desperately seeking solutions.

Larry

[Ellen Brown - Huffpost Blogger]

Yes states are the place to start because they're desperate. I got a call yesterday from a man who works with the New Mexico legislature, who said their state has been decimated with mining, which has destroyed the environment and depleted natural resources. The money was then invested -- in Wall Street (largely Lehman Bros). Their money has been wiped out, and there is no one to sue. They've been scammed, just as African nations have been that have been plundered of resources and gotten virtually nothing in return.

[BobBeresford]

Yes, its worldwide alright. The Lehman collapse/sabotage ( could easily have been kept afloat ) hit Australia hard and here in New Zealand much of our national pension fund and worker superannuation funds had been invested/p­layed/gamb­led in world stock markets and hedge funds. Much now gone. Seemed okay for them to do in boom times, but how far can you trust any stock market ?

But NZ had been shifted onto the IMF neo-liberal 'privatise everything' approach during the 1980's. The country has gone downhill ever since. Shock Therapy may now be tried on California­.....cutti­ng services, selling State assets and privatising things that shouldn't be ?
The IMF has a lot to answer for globally, but the fact that Henry Paulson is an IMF board member and Timothy Geithner is a key IMF planner, can't be reassuring for America ?

[hempmuse]

Once again Ms Brown has written a winning article. California needs a state bank. Why? No one will even honor our IOUs. Money to start a state bank comes from the taxes, fees, penalties and assessments we all pay - something like 1 1/2 trillion dollars.
Keep up the good work Ellen!

[menlopian]

With all due respect, public sector lending is a terrible idea. We ought need look no further than our own federal government, which has helped making a mess of the current housing market through financial sponsorship of Fannie and Freddie and targeted loan programs though FHA/etc for people who have proven they cannot afford the homes well intentioned public programs enabled them to purchase. Government is ineffective at allocating capital because its objectives are swayed by political winds and all other wasteful motives. I am not familiar with India's lending programs but many economists now believe China's public lending programs have created a serious bubble that is on the verge of bursting as we speak. Bad idea jeans all around.

We need government to create policy that constrains private sector greed and limits systemic risk when it infringes on public good. But heaven help us if we use communistic, controlled economies as our template for future economic growth.

[Ellen Brown - Huffpost Blogger]

Modern China has been called the world's greatest capitalist, and India is certainly not communist. Here's the point: China is trouncing us, and India is doing very well thank you. Why? They don't have to go begging to Wall Street banks to fund their bond issues. They fund their own projects. It's ALL money created on a computer screen, whether a public bank does it or a private bank does it. But the private banks are killing us. They've got us by the throats; they're speculating with our money and making us pick up the tab when their bets don't pay off. Did you see that Eliott Spitzer clip on "The Fed is a Ponzi Scheme"? Absolutely true -- we've been saddled with $13 trillion in garbage from the Wall Street banks and we haven't gotten anything in return. Let's sidestep all that, set up our own credit system that does exactly what the Wall Street parasites are doing in terms of creating credit on their books, but keep the profits in the public till rather than speculating them away on ventures in which we get no share at all and have to pick up the bill for damages.

[Ellen Brown - Huffpost Blogger]

Lest you doubt, here's a clip from a Jim Rogers interview:

Q: Everything we've discussed sounds like western-style capitalism. But China's still a Communist country.

A: The Chinese call themselves Communists. No question about that. But they're among the best capitalists in the world. I know people who believe they may be the best capitalists in the world right now. Everybody in the Communist Party is trying to get rich, and the party allows capitalists in.

[Ellen Brown - Huffpost Blogger]

It is WE who have socialism -- socialism for the corporate giants. They've managed to socialize their losses and keep their profits. We actually have something worse than that, the label applied in 1940s Germany; or if we don't have it, we will, if we keep going in the direction we're going. But how can we stand up to the giant international banksters? They've got the purse strings. The first thing we have to do is to get the purse back, and we can do that only by setting up our own credit system.

[Ellen Brown - Huffpost Blogger]

Those housing programs were not designed to help the poor own their own homes. They were designed to keep the banking ponzi scheme going by seducing anyone with a pulse into signing on the dotted line, on loans the loan brokers KNEW the borrowers couldn't possibly repay, with the intention of bundling them up into securities, wrapping them in bogus derivatives that supposedly protected against risk, and selling them off to unwary pension funds and investors in Europe and China.

[HNWBanker]

One false cause fallacy after another. Do you really want to take a 3rd standard deviation event and use it as the basis of your thesis? Western bashing is en vogue; ride the wave while you can. China and India keep wages and their standards of living low for a reason. If they were so much better off than the US, why are so many Chinese and Indians coming to the US and not the other way around? The opportunity for success in China and India is limited, unlike the US. Ask any new immigrant.

Western style capitalism has been the greatest wealth creation system man has ever created. Name a system which has created more wealth for more of its people. As for people buying houses they cannot afford, I suppose you don't believe in personal responsibility.

[BobBeresford]

This USA-World-­bubble/cra­sh has been a while in the making and involves manipulation from persons in Gov and Banking.
Fannie and Freddie were part of that - they were fine till turned into expansionary 'private' enterprises which speculated heavily and paid exec bonuses etc.

Had they been run responsibly, as a public service, they'd be okay. State owned enterprises handling vital things ( money, post, water, mortgages etc ) can work really well - they do in New Zealand. A semi planned economy is arguably the ideal. Okay, excess Gov meddling is a bad thing, but the market definitely does not always get things right, especially in 'financial­ism'.( most NZ Finance Companies have recently gone bust ).

The only way to control dangerous, destabilising greed and speculation is to have all-public banking, with good protocols for developing and helping the economy.
We've been tricked into thinking that the 2 theoretical extremes ( Liberated Bank Capitalism vs Communism ) are the only 2 real choices, when there's a middle way that can work brilliantl­y.........­but it involves a responsible Gov controllin­g/monitori­ng/stabili­sing the money supply.