Gar Alperovitz (What Then Must We Do?, recommended reading) recalls that a lot of distinguished economists and politicians realized long ago that nothing can be done to make the big banks into a reasonably democratic enterprise. They cannot be regulated. They employ armies of million-dollar-a-year lawyers for the expressed purpose of avoiding regulation. If they are broken apart they will simply continue doing what they always do, which is to buy smaller banks until they are too big again.
All that might be OK, if it weren’t for a few factors. Namely, the big bankers all to easily become corrupt and reckless, and endanger the entire national economy, even the world economy, as they did in 2008. They have little interest in the people from whom their billions come. As the losses to the American citizen crossed the $16-trillion mark and millions of lives were ruined, bankers announced the end of the recession and once again began rewarding themselves with annual bonuses hundreds of times larger than the median family income. And they continued buying smaller banks, even during the worst of the crisis, so that many of them are larger now than they were in 2007. Is it any wonder that a whole lot of Americans think defenestration (preferably from the 20th floor) would be suitable treatment for most bankers, as an article in the Atlantic suggested.
Conservative economists long ago understood
the impossibility of controlling banks.
The conservative economists of the Chicago School of Economics long ago understood the impossibility of controlling banks better than did liberals. For example, as Alperovitz notes, Nobel laureate George Stigler demonstrated how regulation became specifically designed for the benefit of the regulated industries.
Alas, what can be done?
One obvious part of the solution is to formally recognize that the conservatives were right, and crucial industries, particularly banking, that cannot be regulated should simply be nationalized. This does not mean that all banks should be run by the government. What it should mean is that government would control government business, such as the issuing of debt—the “printing of money”—which we presently rely on private banks to handle, for a big fee, of course. The big banks that do government business should be run by the government, and not farmed out to very-rich bankers whose primary interest is their own wealth.
Virtually every member of Congress
is beholden to big money powers.
Secondly, a new law separating the functions of banking from investment must be re-established, similar to the Glass-Steagall Act that was destroyed in a fit of freemarketism that proved disastrous for all but billionaire bankers.
This is a tall order for one obvious reason: the big banks quite literally own Congress. Virtually every member of Congress, is beholden to big money powers who not only bankroll their increasingly expensive re-election campaigns, but essentially dictate what they will do while in office. Thinking for themselves or actually representing the interests of their constituents becomes increasingly rare behavior among politicians.
So, is it impossible to nationalize the big banks? Not at all. We just did it. The problem is that we gave them back when we should have kept them. Or at least certain ones. The next time we face an economic crisis—all but guaranteed within the next decade—we should be ready to seize the banking that should be the responsibility of the government and not let go.
Banks that do government business
should be run by the government.
Gar Alperovitz tells us about something else about banking. Significant public and cooperative banking has been going on for a very long time, and such establishments are not readily subject to being consumed by larger banks. Some 7,200 credit unions manage more than a trillion dollars of assets, and perform all of the common services that banks do. (This is why you should move your money to one if you haven’t already.) There are also other non-commercial banking entities, including 140 federal banks and quasi-banks that provide loans and loan guarantees for a wide range of activities. The unique state bank of North Dakota saved the state from the worst of the Wall Street depravity, and now a majority of other states are looking into establishing a state bank.
Wall Street, which considers itself the epitome of free enterprise, nearly caused the collapse of the entire world economy in 2008. But as soon as disaster struck, they called on us, you and me, to rescue them from their headlong reckless irresponsibility. Bastions of democracy while the benefits fill their pockets; sudden socialists when their mendacity catches up to them.
We should seize the banking functions that government should control, and turn the rest loose to sink or swim. It may take us a long time to understand this truth that conservative economists realized long ago.