Public banking

Wall Street's latest insult to the public's trust is paying out billions of dollars in bonuses to their executives: 4,793 bankers and traders with more than $1 million each in bonus payments.

These bonuses weren't tied to national economic growth or some reasonable percentage of company profits. Morgan Stanley, $1.7 billion earnings, paid $4.475 billion bonuses; Goldman Sucks $2.3 billion earnings, $4.8 billion bonuses; JP Morgan Chase $5.6 billion earnings, $8.69 billion bonuses (plus, 1,626 of its execs (that’s a lot of execs for one company) got $1 million or more.

Today we hear so much about a public option for healthcare. How about a progressive public option for banking?

A bank's 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 have been reached. Personal and government 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 off the top but is returned to the public's coffers. Public banking is thus mathematically sound and sustainable.

In several large countries (Canada, India, and China), publicly owned banks have operated alongside privately-owned banks for decades. In those countries the current crisis has served to show that public banks do a better job of serving the people and protecting their interests (mortgages, small business loans) than their private counterparts (1% startup loans for farms).

North Dakota has owned its own bank for nearly a century and is one of only two states (Montana) that are currently not facing shortfalls (WV is close). Ever since 1919, North Dakota's revenues have been deposited in the state owned bank (BND). Under the "fractional reserve" lending plan open to all banks, these deposits are then available for leveraging many times over as loans.

--Bill Arnold