Private banks, with their myriad functions and qualities—like being deputized by the federal government to disburse loans and engage in activities that resemble money creation—don’t exist to advance public good. They exist to rake in exorbitant profits for themselves, proving time and again they’ll do anything in their power to make a quick dollar, and they don’t mind being villainously evil in order to do it. So long as this singular end is protected, as is the case with many behemoth corporations licensed by state charters to populate markets under capitalism, mammoth banking institutions will continue to subject us to their tyranny at the cost of a better functioning society.
Large Wall Street banks were so predatory and played such a fundamental role in the 2007 financial crash that the U.S. government literally had to create a new regulatory agency to protect people from their wrath. And because the banking industry is so heavily consolidated, this leaves many Americans little choice other than to bank at one of “The Big Four”: JP Morgan-Chase, Bank of America, Wells Fargo, or Citigroup, which hold 45% of all deposits in the U.S. Their monopoly power has resulted in a systemic failure for the banking system to respond to the needs of people by guaranteeing access to an essential service by leaving smaller, poorer, and communities of color behind.
According to the Center of American Progress, almost a quarter of households in America are either unbanked or underserved by their bank. They note that Black Americans represent 36.6% of the unbanked population, and are left without a savings or checking account. Further, Black Americans represent over 22% of the entire population of Americans who are underbanked, which means that they must rely on other predatory banking options such as check cashers or high interest loan services even though they technically have a bank account. This allows predatory lending and other exploitative practices that sever access to wealth building to persist, leaving many without viable options to respond to widespread crises, furthering economic inequality.
Throughput the COVID-19 pandemic and the 2007 financial crisis, we have witnesses that without strict enforcement of antimonopoly laws or effective consumer protections, the biggest banks will continue to balloon in size without being held to account for the structural damage they cause. While our conditions worsen because those with immense wealth and access to the levers of power in Congress have no interest in disrupting a system that has brought them great fortunes, there is reason to be hopeful. There exists one viable option on the table to help remedy these harms thanks to Rashida Talib and Alexandria Ocasio-Cortez: Public banking.
According to the public banking institute, “Public banking is banking operated in the public interest, through institutions owned by the people through their representative governments.” There are those in Congress who wish to stop this harm and have been fighting for consumer protection rights for some time like Katy Porter (D-CA.) and Elizabeth Warren (D-MA.), who have grilled Wall St. CEOs in the past for their evil practices and unconscionable pay disparities.
The Talib + AOC Bill recognizes the urgent need to rein in the power of private financial institutions to create a fair, equitable banking system. The appropriately named the Public Banking Act, that recognizes how economic stability and access to building wealth is very much so dependent on the critical services a bank should guarantee to everyone. Their bill would, in addition to proscribing banks from further investing in the fossil fuel industry and being agents of chaos by contributing to the rapid warming of our planet, create community-serving banks and encourage state governments to “establish new channels of public investment” said Talib.
Public banks, that could be housed in local postal service building across the country, would offer a variety of conventional banking services that private commercial banks offer—like loans for mortgages and other money services. Without the need to nickel and dime patrons and absent the profit motive, public banks should offer no ATM fees, hidden charges, restrictive terms, and overdraft penalties (which disproportionately burden those with low-income).
Public banks would also carry the same FDIC insurance and could offer other community funded projects and less harsh debt financing options to patrons. The difference is that people would not have to do this through predatory private banks or try to build their wealth or gain access to credit without involving Wall Street. Public banks could also offer a seamless way to disburse a Universal Basic Income or any future stimulus checks without any potential fines or fees or delay.
There is no advantage to allowing four of largest banks to have enormous control over so many people in one country’s economy, and we have witnessed the damage that cause do over and over again—all the while paying no more than the equivalent of a slap on the risk in fines as punishment for their conquest. Again and again, the American public is harmed by the recklessness of large private banks all together and the tyranny of private commercial banks, and will always be the ones injured for their wrongdoing. As Bernie Sanders once lamented, “If they’re too big to fail, they’re too big to exist.” If our leaders in congress care about taking meaningful steps to achieve racial and economic equality, they would be wise to expand public banking.