Courtesy of Pam Martens.
Throughout the United States there are critical functions that society deems too essential to leave to the vagaries of the profit driven marketplace. Fire and police departments, public schools, parks, libraries, roads, tunnels and bridges – all paid for with taxpayer dollars and overseen by government. So why shouldn’t the U.S. have a parallel system of public banks with a public mandate and accountable to the people – especially at a time of unprecedented corruption in commercial banking under the jackboot of Wall Street.
Until the repeal of the Glass-Steagall Act in 1999, it was illegal for Wall Street firms to own commercial banks. Commercial banks made loans to consumers and businesses and Wall Street investment banks were assigned the job of allocating capital to worthy business enterprises by underwriting their stock and bond offerings. Today, just five Wall Street firms, JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc. are not only underwriting securities, they control 48 percent of total banking system assets according to the St. Louis Federal Reserve.
At the end of 2011, these five firms controlled $8.5 trillion in assets, equal to 56 percent of the U.S. economy. The largest of the banks, JPMorgan Chase & Co., had $1.8 trillion of assets, equal to 14 percent of the total of all 7,307 FDIC insured banks.
That level of concentration should be a wakeup call to a country that was brought to the brink of financial collapse because of a systemically corrupt culture on Wall Street and interlocking deals that tied the fate of one firm to the survival of another. (Too big to fail was also too interlocked to fail, thus the government bailout of Citigroup and AIG and the shotgun marriages of Bear Stearns and Washington Mutual to JPMorgan Chase and Merrill Lynch to Bank of America.)
Equally important, those concentrated assets are not flowing into efficient, long-term job creation. In many cases, the assets are engaged in criminal enterprises that boost bonuses on Wall Street while leaving the unemployed and underemployed struggling to feed their families and the Nation teetering toward the next leg of the mislabeled “Great Recession.” This was no recession; this was the inevitable economic collapse resulting from an institutionalized, corrupt, interlocked wealth transfer system.
Before we outline the critical role that public banking could play in today’s dysfunctional brand of casino finance, let’s recap how Wall Street brought the country to its knees and why we can no longer trust it with our savings or to allocate capital to essential, job producing projects:
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