The Nation: Revolution through Banking?

[marmar]

Revolution through Banking?

Carne Ross
December 22, 2011


It has been clear for some time that the conduct of the banking and financial industry is one very important cause of the 2008 credit crunch. Moreover, for-profit banks by and large fail to deliver services to the poor, deepening poor people's marginalization from the mainstream economy. The banks relentless pursuit of profit, an intrinsic feature of the industry (as of the broader economy), continues to expose all of us to the risk of another banking crisis which would repeat the enormous harm done last time, above all to the world’s poorest. Sadly, it’s unrealistic to expect Washington to do much to curb the industry, given the banks' enormous lobbying sway and privileged access to senior officials, regardless which party is in power.

It’s no surprise then that the banks have been an important focus of discussion in the Occupy Wall Street movement. And a new approach to banking may become one of the important ways that Occupy moves forward and starts producing material change.

.....(snip).....

The ideal bank would be democratically owned and controlled by its customers and its employees. Like at many credit unions, all depositors would get an equal say, regardless of the size of their accounts. It would be non-profit, building in a competitive advantage over the for-profit banks. It would be accessible to all, in particular the poor (we are inspired by the Grameen Bank, started by Mohamed Yunus in Bangladesh). It would be a bank that anyone can bank with and receive better service than what they receive today at conventional banks. Any small-scale bank we establish say in New York would have be to be replicable by others elsewhere.

The banking crisis was caused by several intrinsic characteristics of the financial system. The level of debt and risk was concealed by the unintelligibility, but also by the secrecy and opacity, of many banking practices. The infamous credit default options concealed risk as they spread it and were barely understood even by the bankers trading or buying them. In contrast, an Occupy bank would be wholly transparent, perhaps even in real time, showing transactions as they happen. Technology now makes this plausible. Likewise, technology has enabled new peer-to-peer platforms where borrowers and lenders negotiate with each other directly. We have also discussed minimizing risk by adopting some of the ideas of Laurence Kotlikoff, whose concept of “limited purpose banking” permits no build up of liabilities within a bank because all liabilities would be mutualized. Kotlikoff proposes that banks would essentially become clearing houses where investors would "buy" the loans of other customers via a cash-based mutual fund. The bank would not itself hold any loans, thereby eradicating the risk of a bank run. .................(more)

The complete piece is at: http://www.thenation.com/article/165333/revolution-through-banking

[dkf]

1. This already exists as they note...it's called a credit union.

And credit unions can fail too.

[stockholmer]

2. here is great model bank from here in Sweden (JAK Members Bank)

http://www.feasta.org/documents/review2/carrie2.htm

http://jak.aventus.nu/22.php

The JAK MEMBERS BANK
THE INTEREST-FREE SAVINGS AND LOAN SYSTEM

JAK has been operating an interest-free savings and loan system since 1970. A bank license was obtained in 1997. Formally JAK is a co-operative bank. We have 35,000 members and our growth is 5 percent per year.

Members’ deposits finance all loans. The members have saved a total sum of € 97 million and have borrowed € 86 million. (2008)

Annual membership fees and loan fees (equals approximately 2.5 % effective rate of interest) cover administration and development costs.

In combination with the interest-free savings account we have two products. Both are interest-free.
1. The (Original) Balanced Savings Loan (best suited for individuals).
2. The (New) Support Savings & Loan Instrument (for small companies and associations). Note: This English language version is a short version intended for your information only. The Swedish language version is the official and complete version.

[marmar]

3. Cool....Thanks for the links.

nt

[Zorra]

4. "unintelligibility..secrecy..opacity, of many banking practices..concealed risk..barely understood/

/...Please allow me to introduce myself
I'm a man of wealth and taste...
...Pleased to meet you, hope you guess my name
But what's puzzling you
Is the nature of my game.../"

The OP article reads like our adversary enticingly inviting us to join and become it.

Credit Unions already exist. IMO, it's time to completely abolish the practice, even the possibility, of Woo-based Finance Capitalism.

[xchrom]

5. Du rec. Nt