From: Ellen Brown <[email protected]>
Here is my latest article, posted on Common Dreams –
The Revolution Will Not Be Televised: Quiet Drama in Philadelphia
“You will not be able to plug in, turn on and cop out.
You will not be able to skip out for beer during commercials,
Because the revolution will not be televised. . . .
The revolution will be live.”
--From the 1970 hit song by Gil Scott-Heron
Last week, the city of Philadelphia's school system announced that it expects to close 40 public schools next year, and 64 schools by 2017. The school district expects to lose 40% of its current enrollment, and thousands of experienced, qualified teachers.
But corporate media in other cities made no mention of these massive school closings -- nor of those in Chicago, Atlanta, or New York City. Even in the Philadelphia media, the voices of the parents, students and teachers who will suffer were omitted from most accounts.
It’s all about balancing the budgets of cities that have lost revenues from the economic downturn. Supposedly, there is simply no money for the luxury of providing an education for the people.
Where will those children find an education? Where will the teachers find work? Almost certainly in an explosion of private sector “charter schools,” where the quality of education -- from the curriculum to books to the food served at lunch -- will be sacrificed to the lowest bidder, and teachers’ salaries and benefits will be sacrificed to the profits of the new private owners, who will also eat up many millions of dollars of taxpayer subsidies.
Why does there always seem to be enough money for military expansion, prisons, bank bailouts and tax cuts for the wealthy, but not enough for education—or for jobs, housing, healthcare, or old age pensions? These are not “welfare” but are part of the social contract for which we pay taxes and make social security payments.
In an article reprinted on Truthout on May 10th titled “Why Isn't Closing 40 Philadelphia Public Schools National News?,” Bruce Dixon posed this answer:
The city has a lot of poor and black children. Our ruling classes don't want to invest in educating these young people, preferring instead to track into lifetimes of insecure, low-wage labor and/or prison. Our elites don't need a populace educated in critical thinking. So low-cost holding tanks that deliver standardized lessons and tests, via computer if possible, operated by profit-making "educational entrepreneurs" are the way to go.
“Lifetimes of insecure, low-wage labor or prison”—this is very close to the “indentured servitude” that was abolished along with slavery by the 13th Amendment to the Constitution, ratified in 1865. The freed slaves are being recaptured by debt, beginning with the debt of school loans, followed by credit card debt, mortgage debt, and healthcare costs.
As was cynically observed in a document called the Hazard Circular, allegedly circulated by British banking interests among their American banking counterparts in July 1862:
[S]lavery is but the owning of labor and carries with it the care of the laborers, while the European plan, led by England, is that capital shall control labor by controlling wages. This can be done by controlling the money. The great debt that capitalists will see to it is made out of the war, must be used as a means to control the volume of money. . . . It will not do to allow the greenback, as it is called, to circulate as money any length of time, as we cannot control that. [Quoted in Charles Lindburgh, Banking and Currency and the Money Trust (Washington D.C.: National Capital Press, 1913), page 102.]
The quotation may be apocryphal, but it graphically conveys the fate of our burgeoning indentured class. It also suggests the way out: we must recapture the control of our money and banking systems, including the issuance of debt-free money (“greenbacks”) by the government.
Meanwhile, in Other Unreported News . . .
That alternative vision was put before a conference in Philadelphia in late April that drew delegates from all over the United States. The theme of the first Public Banking in America conference, held at the Quaker Friends Center on April 28-29th, was that to fix the economy, we first need to take back the “money power”—the power to create currency and credit.
Led by keynote speakers Gar Alperovitz and Hazel Henderson and highlighted in an electric speech by twelve-year-old Victoria Grant, the conference was all about solutions. As summarized by OpEdNews editor Josh Mitteldorf:
There were two visions expressed . . . . The first is the very practical idea that states and cities around America could be rescued from insolvency if they had their own banks, instead of relying on commercial banks to borrow money through bonds. Tax-exempt bond issues supply money to states and municipal governments typically at 5 or 6% interest, while banks these days are able to borrow from the Fed at 1/4% per year.
The second vision is . . . the radically-subversive idea that the system we have for introducing money into the economy is a boon for the banks, but perhaps a major drag on our economy. Perhaps a simple, direct system of money creation by the Treasury Dept instead of the Fed would put an end to cycles of recession, and create a foundation for long-term prosperity.
Banking is a huge leech on our economy. 40% of every dollar we spend on goods and services -- 40% of all that we create and all we consume -- is siphoned off the top as bank interest in one form or another. (Calculations of Margrit Kennedy) The US Government is in the absurd position of paying interest to a private bank for every dollar that is put into circulation. The Federal Reserve system has privatized the power to create money, which, according to the Constitution, ought to belong to Congress alone. Presently, interest on the national debt costs the Federal government $500 billion in 2011, and (because of structural deficit spending) it is the fastest-growing portion of the Federal budget.
Five hundred billion dollars could be saved annually just by refinancing the federal debt through our own central bank, interest-free. This is not an off-the-wall idea but has actually been done, very successfully. Among other instances, it was done in Canada from 1939 to 1974, as was detailed by the youngest and oldest speakers at the conference, 12-year-old Victoria Grant and former defense minister Paul Hellyer, founder of the Canadian Action Party. Another Canadian at the conference, Toronto Councillor Kristyn Wong-Tam, has proposed that the Toronto city council could improve its finances by forming its own bank.
The direct solution to the economic crisis, urged by veteran money reformer Bill Still, would be for the federal government to simply create the money it needs, as the American colonists did by printing paper scrip and Abraham Lincoln did by printing greenbacks.
But cities and states don’t need to wait for a deadlocked federal Congress to act. As Wong-Tam has proposed for Toronto, they can divest their public revenues from the too-big-to-fail banks and put them in their own publicly-owned banks. These banks could then do what all banks do: leverage capital, backed by deposits, into money in the form of bank credit.
This newly-created bank money would then be available for the use of the local government interest-free (since the government would own the bank and would get the interest back as dividends). Among other possibilities, the money could be used to restore the schools. This would not be an expenditure but an investment, as illustrated by the G.I. Bill, which provided education and low-interest loans for returning servicemen after World War II. Economists have determined that for every 1944 dollar invested in the G.I. Bill, the country received approximately $7 in return, through increased economic productivity, consumer spending, and tax revenues.
Legislation for public banks has now been introduced in 18 U.S. states, on the model of the highly successful Bank of North Dakota (BND). Elaborated on at the Public Banking conference by Ed Sather and Rozanne Junker, the BND is currently the country’s only state-owned bank and has been a major factor in allowing the state to escape the recent credit crisis. North Dakota is the only state to boast a significant budget surplus every year since the economic downturn of 2008.
Ellen Brown noted that 40% of banks globally are also publicly-owned. These are largely in the BRIC countries (Brazil, Russia, India, and China), which also escaped the credit crisis, largely because their public banks did not rely on derivatives and, unlike private banks, lent counter-cyclically to cushion their economies from the downturn.
Conference speaker Samuel Giles proposed that even public universities could set up their own banks, which could then leverage university monies for the university’s own use, rather than giving those assets away to Wall Street to be speculated with and lent back at much higher interest rates.
Innovative Solutions for Pennsylvania
Speakers Michael Sauvante and Mike Krauss noted that efforts are underway in several Pennsylvania and Ohio municipalities to create public banks. One possibility is for public banks to take an aggressive role in ending the foreclosure crisis by acquiring abandoned and foreclosed homes by eminent domain. These homes could be added to the asset base of the bank, which could extend credit to restore them and then sell or rent them at reasonable rates.
Krauss noted that Philadelphia already has a strong effort underway to create a “land bank”—a bank to acquire, rehabilitate and create productive uses for the city's more than 40,000 vacant properties—and legislation (HB 1682) has been introduced in the state legislature to enable this effort. But the land bank proposed is not designed to function as a depository bank that leverages funds into credit. Rather, it would simply work with appropriated funds or bond revenue. This is a positive step toward addressing a real need, but it could be enhanced by turning the land bank into a public bank—a chartered bank having the power to create money as credit on its books.
The efforts for developing public banks in Pennsylvania are being led by the Pennsylvania Project, which was a co-sponsor of the Philadelphia conference and is supported in its work by the Public Banking Institute and the Center for State Innovation. The Pennsylvania Project is creating partnerships with other Pennsylvania public policy organizations to introduce legislation for a state Bank of Pennsylvania in 2013, after elections are held and a strong foundation of support has been laid.
Revolution Without Bloodshed or War
We live under a tyranny today that is just as intolerable and unjust as that in 1776, but violent revolution is no longer an option. Our oppressors own the military and the media, and their FEMA camps are waiting for us.
If change is to come, it must be peaceful and legal, beginning with a revolution in the minds and hearts of the people. The message of the Public Banking in America Conference was that we can throw off the yoke of the financial elite by making money and credit a public utility; and the most feasible place to start is at the local level, with publicly-owned banks.
For videos of some of the speakers, see http://www.publicbankinginamerica.org/speakers.htm. More to come. The Victoria Grant video has gone viral, approaching half a million hits, including copies.
Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest of eleven books, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. She is president of the Public Banking Institute, http://PublicBankingInstitute.org, and has websites at http://WebofDebt.com and http://EllenBrown.com.
How appropriate, that our new money/banking system would be created in Philly by Qaukers. Ben Franklin must be cheering from his grave!
This is the speech that 12-year old, Victoria Grant gave to a rotary club. The video has gone viral since its upload on May 8th.
http://publicbankinginstitute.org/
• Potentially available to any-sized government or community
able to meet the requirements for setting up a bank.
• Owned by the people of a state or community.
• Economically sustainable, because they operate transparently according to applicable banking regulations
• Able to offset pressures for tax increases with returned credit income to
the community.
• Ready sources of affordable credit for local governments, eliminating the need for large “rainy day” funds.
• Required to promote the public interest, as defined in their
charters.
• Constitutional, as ruled by the U.S. Supreme Court
bankers.
• Boondoggles for bank executives; rather, their employees are
salaried public servants (paid by the state, with a transparent pay structure) who would likely not earn bonuses, commissions or fees for generating loans.
• Speculative ventures that maximize profits in the short term,
without regard to the long-term interests of the public.
Read what Thomas Edison had to say about the government issuing money rather than bonds.
As of the spring of 2010, North Dakota was also the only state sporting a major budget surplus; it had the lowest unemployment and default rates in the country; and it had the most community banks per capita, suggesting that the presence of a state-owned bank has helped, not hurt, the local banks. More ...
Announcing the Founders' Circle -- Join while you can! It's a great way to support PBI Programs!
Don't have a public bank? Contact the Public Banking Insitute to find out how you can start one in your community. Public banks are common throughout much of the rest of the developed world -- Germany and Japan have some of the largest public banks. Let's get with it and take our credit back from private banks -- let's Move OUR Money!
click to download
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Thursday, May 24, 2012 05:30 AM PDT
Cooperative banking has arrived
Alternative to the bad corporate giants are growing in the U.S. and abroad -- and they could transform our economy
By Ellen Brown, Alternet
According to both the Mayan and Hindu calendars, 2012 (or something very close) marks the transition from an age of darkness, violence and greed to one of enlightenment, justice and peace. It’s hard to see that change just yet in the events relayed in the major media, but a shift does seem to be happening behind the scenes; and this is particularly true in the once-boring world of banking.
Today, the massive too-big-to-fail banks are hardly doing George Bailey-style loans at all. They are not interested in community lending. They are doing their own proprietary trading—trading for their own accounts—which generally means speculating against local interests. They engage in high-frequency program trading that creams profits off the top-of-stock market trades; speculation in commodities that drives up commodity prices; leveraged buyouts with borrowed money that can result in mass layoffs and factory closures; and investment in foreign companies that compete against our local companies.
We can’t do much to stop them. They’ve got the power, especially at the federal level. But we can quietly set up an alternative model, and that’s what is happening on various local fronts.
Most visible are the Move Your Money and Occupy Wall Street movements. According to the Web site of the Move Your Money campaign, an estimated 10 million accounts have left the largest banks since 2010. Credit unions have enjoyed a surge in business as a result. The Credit Union National Association reported that in 2012, for the first time ever, credit union assets rose above $1 trillion. Credit unions are non-profit, community-minded organizations with fewer fees and less fine print than the big risk-taking banks, and their patrons are not just customers but owners, sharing partnership in a cooperative business.
Move “Our” Money: The Public Bank Movement
The Move Your Money campaign has been wildly successful in mobilizing people and raising awareness of the issues, but it has not made much of a dent in the reserves of Wall Street banks, which already had $1.6 trillion sitting in reserve accounts as a result of the Fed’s second round of quantitative easing in 2010. What might make a louder statement would be for local governments to divest their funds from Wall Street, and some local governments are now doing this. Local governments collectively have well over a trillion dollars deposited in Wall Street banks.
A major problem with the divestment process is finding local banks large enough to take the deposits. One proposed solution is for states, counties and cities to establish their own banks, capitalized with their own rainy day funds and funded with their own revenues as a deposit base.
Today only one state actually does this: North Dakota. North Dakota is also the only state to have escaped the credit crisis of 2008, sporting a sizeable budget surplus every year since. It has the lowest unemployment rate in the country, the lowest default rate on credit card debt, and no state government debt at all. The Bank of North Dakota (BND) has an excellent credit rating and returns a hefty dividend to the state every year.
The BND model hasn’t yet been duplicated in other states, but a movement is afoot. Since 2010, 18 states have introduced legislation of one sort or another for a state-owned bank.
Values-based Banking: Too Sustainable to Fail
Meanwhile, there is a strong movement at the local level for sustainable, “values-based” banking—conventional banks committed to responsible lending and service to the local community. These are George Bailey-style banks, which base their decisions first and foremost on the needs of people and the environment.
One of the leaders internationally is Triodos Bank, which has local offices in the Netherlands, Belgium, the United Kingdom, Spain, and Germany. Its Web site says that it makes socially responsible investments that are selected according to strict sustainability criteria and overseen by an international panel of “stakeholder” representatives representing various community, environmental, and worker interest groups. Investments include the financing of more than 1,000 organic and sustainable food production projects, more than 300 renewable energy projects, 33 fair trade agricultural exporters in 22 different countries, 85 microfinance institutions in 43 countries, and 398 cultural and arts projects.
Two U.S. banks exemplifying the model are One PacificCoast Bank and New Resource Bank. Operating in California, Oregon and Washington, One PacificCoast is comprised of a sustainable community development bank with around $300 million in assets and a non-profit foundation (One PacificCoast Foundation). Its commercial lending business focuses on such sectors as specialty agriculture, renewable energy, green building, and low-income housing. Foundation activities include programs to “help eliminate discrimination, encourage affordable housing, alleviate economic distress, stimulate community development and increase financial literacy.”
New Resource Bank is a California based B-corporation (“Benefit”) with $171 million in assets, which focuses its lending and banking services on local green and sustainable businesses. New Resource was recognized in 2012 as one of the “Best for the World” businesses, being in the top 10 percent of all certified B-Corporations and scoring more than 50 percent higher than 2,000 other sustainable businesses in overall positive social and environmental impact.
All this might be good for the world, but isn’t investing locally in a values-based bank riskier and less profitable than putting your money on Wall Street? Not according to a study commissioned by the Global Alliance for Banking on Values (GABV). The 2012 study compared the financial profiles between 2007 and 2010 of 17 values-based banks with 27 Globally Systemically Important Financial Institutions (GSIFIs)—basically the too-big-to-fail banks, including Bank of America, JPMorgan, Barclays, Citicorp and Deutsche Bank. According to the GABV report, values-based banks delivered higher financial returns than some of the world’s largest financial institutions, with a return on assets averaging above 0.50 percent, compared to just 0.33 percent for the GSIFIs; and returns on equity averaging 7.1 percent, compared to 6.6 percent for the GSIFIs. They appeared to be stronger financially, with both higher levels of and better quality capital; and they were twice as likely to invest their assets in loans.
CDFIs
Along with the values-based banks, community investment is undertaken in the United States by Community Development Financial Institutions (CDFIs), including community development banks, community development credit unions, community development loan funds, community development venture capital funds, and microenterprise loan funds. According to the CDFI Coalition, there are over 800 CDFIs certified by the CDFI Fund, operating in every state in the nation and the District of Columbia. In 2008 (the last year for which a report is available), CDFIs invested $5.53 billion “to create economic opportunity in the form of new jobs, affordable housing units, community facilities, and financial services for low-income citizens.”
Two of many interesting examples are the Alternatives Federal Credit Union and Boston Community Capital. Alternatives FCU, located in Ithaca, New York, is committed to community development and social change and is part of the Alternatives Group, which includes a non-profit corporation (Alternatives Community Ventures); a 40-year old trade association of community groups, cooperatives, worker-owned businesses and individuals (Alternatives Fund); and a not-for-profit organization that facilitates secondary capital investment in the credit union (Tomkins County Friends of Alternatives, Inc.). The credit union has over $70 million in assets and offers many innovative financial products, including individual development accounts—special savings accounts for low-income residents that offer matching deposits of two to one up to a certain amount—in addition to more traditional services such as loans for minority and women-owned businesses, and affordable mortgages. The credit union also offers small business development (classes, seminars, consultation, and networking programs), free tax preparation, and a student credit union.
Although its lending programs focus on lower-income borrowers, Alternatives FCU has had lower delinquency and charge-off rates than many major banks that avoid these types of customers. Boston Community Capital (BCC) is a CDFI that is not actually a bank but invests in projects that provide affordable housing and jobs in lower-income neighborhoods. BCC includes a loan fund, a venture fund, a mortgage lender, a real estate consultation organization, a solar energy fund, and a federal New Markets Tax Credit investment vehicle. Since 1985, it has invested over $700 million in local organizations and businesses. These funds have helped build or preserve more than 12,800 affordable housing units, as well as child care facilities for almost 9,000 children and healthcare facilities that reach 56,000 people. Their investments have helped renovate 850,000 square feet of commercial real estate, generate 5.9 million KW hours of solar energy capacity, and create more than 1,500 jobs.
Less Money for Banks and More for Workers: The Models of Germany and Japan
Values-based banks and CDFIs are a move in the right direction, but their market share in the U.S. remains small. To see the possibilities of a banking system with a mandate to serve the public, we need to look abroad.
Germany and Japan are export powerhouses, in second and third place globally for net exports. (The U.S. trails at 192nd.) One competitive advantage for both of these countries is that their companies have ready access to low-cost funding from cooperatively owned banks.
In Germany, about half the total assets of the banking system are in the public sector, while another substantial chunk is in cooperative savings banks. Germany’s strong public banking system includes 11 regional public banks (Landesbanken) and thousands of municipally owned savings banks (Sparkassen). After the Second World War, it was the publicly owned Landesbanks that helped family-run provincial companies get a foothold in world markets. The Landesbanks are key tools of German industrial policy, specializing in loans to the Mittelstand, the small-to-medium size businesses that drive the country’s export engine.
Because of the Landesbanks, small firms in Germany have as much access to capital as large firms. Workers in the small business sector earn the same wages as those in big corporations, have the same skills and training, and are just as productive. In January 2011, the net value of Germany’s exports over its imports was 7 percent of GDP, the highest of any nation. But it hasn’t had to outsource its labor force to get that result. The average hourly compensation (wages plus benefits) of German manufacturing workers is $48—a full 50 percent more than the $32 hourly average for their American counterparts.
In Japan, the banks are principally owned not by shareholders but by other companies in the same keiretsu or industrial group, in a circular arrangement in which the companies basically own each other. Even when there are nominal outside owners, corporations are managed so that the bulk of the wealth generated by the corporation flows either to the workers as income or to investment in the company, making the workers and the company the beneficial owners.
Since the 1980s, U.S. companies have focused on maximizing short-term profits at the expense of workers and longer-term goals. This trend stems in part from the fact that they are now funded largely by capital from shareholders who own the company and want simply to grow their returns. According to a 2005 report from the Center for European Policy Studies in Brussels, equity financing is more than twice as important in the U.S. as in Europe, accounting for 116 percent of GDP compared with 62 percent in Japan and 54 percent in the eurozone countries. In both Europe and Japan, the majority of corporate funding comes not from investors but from borrowing, either from banks or from the bond market.
Funding with low-interest loans from cooperatively owned banks leaves greater control of the company in the hands of employees who either own it or have much more say in its operation. Access to low-interest loans can also slash production costs. According to German researcher Margrit Kennedy, when interest charges are added up at every level of production, 40 percent of the cost of goods, on average, comes from interest.
Globally, the burgeoning movement for local, cooperatively owned and community-oriented banks is blazing the trail toward a new, sustainable form of banking. The results may not yet qualify as the Golden Age prophesied by Hindu cosmology, but they are a major step in that direction.
Ellen Brown is an attorney, author, and president of the Public Banking Institute. Her latest book is Web of Debt.