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Overthrow the Speculators

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Posted on Dec 29, 2013
AP/Richard Drew

Traders work at the Goldman Sachs posts on the floor of the New York Stock Exchange in 2012.

By Chris Hedges

(Page 2)

Public banks also protect us from the worst forms of predatory capitalism. Reporters Trey Bundy and Shane Shifflett last January wrote in the San Francisco Chronicle on how one of Wall Street’s numerous scams works. When the Napa Valley Unified School District in California needed funds in 2009 to build a high school in American Canyon it took out a $22 million loan with no payments due for 21 years. “By 2049, when the debt is paid,” the paper noted, “the $22 million loan will have cost taxpayers $154 million—seven times the amount borrowed.” And Napa, the paper reported, is one of at least 1,350 school districts and government agencies across the nation that have engaged in this form of borrowing, called capital appreciation bonds, to finance major projects. Capital appreciation bonds mean billions in debt for the public and hundreds of millions of dollars for the speculators, the reporters pointed out. And this kind of scam is writ large across the entire society.

“California public schools received $9 billion in loans over the last seven years,” said Armstrong, who is from California. “In 25 to 30 years the interest due on that $9 billion will be $27 billion. This is just one example of the massive societal crisis being caused by big banks. Wall Street investment banks should not be permitted to handle public financing, which has become simply another way for Wall Street to monetize and extract our nation’s wealth.”

The potential windfall for communities through the establishment of public banks is huge. In a study prepared in Vermont in support of establishing a public bank it was estimated that a public bank could make loans equal to 66 percent of state funds on deposits, or $236.2 million in credit for economic development in the state. This would expand the total credit supply available for state lending agencies by $236.2 million. Furthermore, the credit would be at a low cost to the state because public banks do not have to borrow money by selling bonds. Public banks make loans based on deposits. Interest returns to the state on loans and deposits. In essence, the state lends money to itself. The availability of $236.2 million in new lending, the study estimates, would create 2,535 new jobs, $192 million in value added (gross state product) and a $342 million increase in state output. “If used to finance state capital expenditures, funding through a public bank could save close to $100 million in interest costs on [fiscal year] 2012-13 capital spending, due to most interest payments no longer leaving the state,” the report says.

U.S. Sen. Bernie Sanders of Vermont and U.S. Rep. Peter DeFazio of Oregon have called for a national infrastructure bank. The U.S. Postal Service would fund the proposed bank. The Postal Service—which from 1911 until 1967 provided basic checking and savings services to the public—with its offices in nearly every community has the physical infrastructure to jump-start a national public bank. Deposits would be invested in government securities. These securities would be used to finance infrastructure projects. And the proposal would not require raising taxes. The plan, which I doubt the banking lobbyists and their lackeys in Congress will ever permit, would in addition to saving the Postal Service itself provide access to banking for the one in four households that cannot get such services.

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We won’t be saved by anyone in Washington. We will have to save ourselves. We will have to transform our communities, cities and states into places where the consent of the governed is no longer a joke. We will have to take back power, which in a corporate state is financial power, from the venal class of speculators who hold us hostage. In open defiance we will have to build our own independent institutions. Of course the speculators will fight back. And they will fight dirty—they know the consequences of this revolt. Public banks are not just about the economy. They are about liberty.


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