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FDL Book Salon Welcomes Ellen Brown, The Public Bank Solution: From Austerity to Prosperity

Welcome Ellen Brown (Public Bank Solution) (TruthOut) (HuffingtonPost) and Host, Les Leopold (TruthOut) (Salon) (author, How to Make a Million Dollars an Hour: Why Hedge Funds Get Away with Siphoning Off America’s Wealth)

The Public Bank Solution: From Austerity to Prosperity

Ellen Brown is our national treasure. While Wall Street increases its grip on America, she is letting us know that it doesn’t have to be that way. No one makes a stronger and clearer case about why it’s time to put an end to Wall Street as we know it. While many progressive analysts (including me) rant and rave about how we’re being robbed blind by large banks and hedge funds, Ellen Brown understands how banking works and what we can actually do about it.

The secrets that Ellen reveals in The Public Banking Solution will completely turn your head around. It did mine and I’ve been writing about banking since the financial crash in 2008. What I never understood until Ellen made it so clear in this book is that about 90% of all money in circulation is created by private banks — not the U.S. mint, not the Federal Reserve, not the Treasury. The secret is this: When banks make loans, they “create money out of thin air.” They’re not just loaning out depositor money. They actually are creating new money that goes into circulation.

By this point you might be thinking, “Who wants to read a technical book about banking?” Trust me. This is not a technical book, nor is it rhetorical. Let me be blunt: You will want to read it because it offers a vision for taking our country back from the banksters and their political flunkies.

Here’s the core of her argument. Because banks create most of our money, they control the very essence of the economy. To regain control of our economic well-being we need public banks that make investments in the public goods, services and jobs that we all need. Public banks can do all that without running up the national debt or raising taxes. Public banks, like private banks, fund investments. But, as Ellen writes:

The difference is that a publicly-owned bank returns the interest to the government and the community, while a privately-owned bank siphons it into private accounts, progressively drawing money out of the productive economy. (pg 204)

Viewed from a macro-level, in too-big-to-fail private banks the returns mainly go to enrich the top 1/100th of the top 1%. In public banks the returns go to enrich the nation.

Pie in the sky? I mean how can she be writing about public banks when Washington is cutting food stamps for the hungry? And even if Washington weren’t entirely gridlocked, isn’t this just another misguided effort towards big government, the kind that so miserably failed in Communist countries?

No.  You’ll find out in a hurry that Ellen is trying to save capitalism, not destroy it. And she’s incredibly practical. In fact, she is making the best case I’ve ever come across that in order to have a vibrant free-enterprise system, we need public banks.

Think about what we have now. The largest banks crashed the economy in 2008. We bailed them out because they were too big to fail and now they are even larger. The economy has barely recovered but the big banks have, making tens of millions for their executives and investors…like nothing much had happened. They now deploy more money on financial gambling (called proprietary trading) than they use for investments in business and consumer loans. When they crash again (a near certainty, don’t you think? ) there will be more bailouts (or bail-ins as Ellen calls them where depositors will have to cough up money to bailout out their own bankers). The bankers get to keep all the winnings while we pick up the losses. Is that capitalism? Adam Smith wouldn’t recognize it.

But more importantly, the current Wall Street banking system is both dangerous and corrupt. The incessant financial gambling threatens the entire global economy. Banks are so large and so powerful that they can’t be adequately regulated or disciplined. Financial wealth distorts democracy as it pours into politics further minimizing any and all regulations.

While so many of us have given up any hope of significantly changing Wall Street, Ellen shows us exactly how it can be done through public banking.

But where is the money going to come from to start public banks? The country is in no mood to run up more debt. First of all, if we had the option, millions of us would probably rush to move our money from Wall Street banks and into public banks. After all, few Americans trust Wall Street. As Ellen points out, our post offices could actually house branches of a national public retail bank similar to the excellent postal bank in Japan.

Don’t trust the Post Office? Then how about a state bank like the one in North Dakota. In fact, starting a state bank requires much less effort and almost no additional funding. Here’s another Brown revelation: Right now every time we pay our state and local taxes, or buy a drivers license, the money doesn’t just sit in a vault in city hall. It usually goes into a Wall Street bank which then provides state and local governments with cash management services. (Local banks are far too small to provide those services.) All in all, about $1 trillion of our tax money each year runs through Wall Street banks in every state….except North Dakota, which has a public bank.

Using those public funds as a base, the Bank of North Dakota supports state investments that have produced the lowest unemployment rate in the country PLUS a robust profit for the state’s treasury. No exorbitant banker salaries, no gambling in Wall Street derivatives. Just honest banking for the public good. That so-called socialist bank (created by the Populists in 1919) is so good that it thrives in one of the most conservative states in the union.

There’s so much more in the book that we don’t have time to explore. It gives us a history of banking and a review of public banking in countries all over the world. (Did you know that the largest bank in the world is publicly owned?) And her chapter on the Reconstruction Finance Corporation, (“The Little-Known Public Financial Institution that Reversed the Depression and Funded World War II.”) is a must read for progressive activists and policy wonks.

Thank you, Ellen, for opening our eyes and lighting the way to ending Wall Street’s rule. Let’s hope a million readers see the light as well.


Les Leopold is the Executive Director of the Labor Institute in New York and author of, How to Make a Million Dollars an Hour: Why Hedge Funds get away with Siphoning off America’s Wealth (Wiley, 2013)
[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions.  Please take other conversations to a previous thread. – bev]
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