Break-Out Discussion for Thursday 12/1 General Assembly: Alternative Banking

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The Alternative Banking working group is developing the idea of establishing a different kind of bank. At this early stage, Alternative Banking seeks the input and feedback of the GA in regard to this idea. Please see details below.

The Commons: A Good Bank


11-24-11  DRAFT

This note has been prepared by the alternative banking working group of the Occupy Wall Street (OWS) movement.  The note is for discussion with the OWS movement and more broadly.

The purpose of this note is to describe the characteristics of an ideal bank that embodies the values of the OWS movement.  The current banking system lies at the heart of our current economic crisis of increasing volatility and inequality.  To change that system, we need to replace it with a better bank.  What would be the characteristics of this bank?

None of these features is new, and many are already evident in credit unions, community banks and “mutuals”.  But our purpose is to imagine something that might have a broader reach and impact – that might transform the banking system, and thus, by its example and through its operations, potentially create an economy that is fairer, more inclusive, democratically managed and stable.

  1. Democratic – all customers would own the bank, and have an equal say in its governance, regardless of the amount of money in their accounts.  Employees – or rather partners – might be co-owners of the bank, forming a co-operative.
  2. Accessible – the bank’s services would be accessible to all, and in particular the poor, who are often excluded from today’s banking system, thus making them vulnerable, for instance, to predatory lending.  Ideally, the bank would be available to anyone in the country, and perhaps one day, the world.
  3. Stable – the bank would eschew the risky practices of the for-profit banks that have damaged the world economy (affecting particularly the poor) and perpetuate systemic risk.  Instead, it would operate in a way to minimize risk, for instance by mutualising all its liabilities in a manner suggested in Laurence Kotlikoff’s concept of “Limited Purpose Banking”.
  4. Non-profit – the bank would be run for the benefit of its customers and employees.  Any profit would be returned to customers in the form of cheaper loans or other services, or pro bono services – such as interest-free loans – for those in dire need.  Without the need to generate profits or maintain a high stock price, the bank could offer more competitive services than the for-profit banks, thereby contributing to the next characteristic.
  5. Competitive – the bank would offer services to individuals and businesses that would be as good as or better than those offered by for-profit banks.  This objective is plausible if the bank is non-profit, and has a “light” infrastructure, perhaps by essentially operating as a “clearing house” to match lenders and borrowers (similar but not identical to “peer-to-peer” services).  We also note the abysmal quality of current banking services in the US, in contrast for example to those offered in many European countries.
  6. Transparent – the opacity and unintelligibility (even to those working in finance) of the financial system have contributed to the “credit crunch” collapse.  The operations of this bank would by contrast be wholly transparent, thus again helping minimize any risk caused by its operations.
  7. Equal – no partner or employee in the bank would be paid more than a certain multiple of the lowest-paid worker, for instance no more than eight or five times that number.  In this way, the bank would promote greater equality and would encourage this characteristic in the economy more widely.  This would also contribute to the competitiveness of the bank.

In establishing the bank, the principles embodied in the characteristics outlined above should be followed as much as possible (“the means are the ends”).  One possibility to consider too is that, like the Grameen Bank, the bank might operate upon trust rather than legal contract with its customers, thus helping rebuild this scarce social commodity.

If there is general consensus within OWS and perhaps more broadly on the desirability of such a bank, the Alternative Banking group will set itself to the design and perhaps construction of the bank, drawing on the examples and experience – and perhaps the assistance – of similar such banks around the world.  But there is no monopoly here: anyone is free to take inspiration from these ideas and embark upon the same challenge.

New York City

November 24, 2011

5 Responses to “Break-Out Discussion for Thursday 12/1 General Assembly: Alternative Banking”

  1. John Turmel

    such as interest-free loans – for those in dire need.
    Jct: You’re going to keep charging usury to those not in need until they end up in need? Not such a “Good Bank” when there’s already a perfect model using the Time Standard of Money: UNILETS. Dennis Kucinich Greenbacks are another great interest-free government model currency. Forget starting your own dinky toy, help Kucinich fix the whole country.

  2. JZ

    Interest-free micro-loans ($30) and perhaps could act as a storage gallery of items people are offering for barter. Info on the bartering details and helps make connections between those willing to barter.

  3. Brendan

    the word “loan” implies a payback. John do you mean “people in dire need” or “people in dire need who can pay the loan back” such will be an important distinction for the Good bank.

  4. Brother Pelican

    Actually, there are several interesting permutations of the idea of a people’s bank:
    Credit Unions that were founded a two centuries ago in Europe to provide credit to local businesses in places that money center banks simply couldn’t be bothered with. Wikipedia has a great entry on the history of Credit unions.

    The current US Credit Union structure was set up In 1934 when President Roosevelt signed the Federal Credit Union Act into law authorizing the formation of federally chartered credit unions in all states. The purpose of the federal law was to make credit available and promote thrift through a national system of nonprofit, cooperative credit unions, that would provide some alternative to dysfunctional, failing banks. Credit Unions still have a structure that is somewhat in competition with the official banking, and perhaps a OWS Credit Union would be interesting.

    However, there are even more radical alternative People’s Bank structures for communities that want to incentivize local enterprise. These are bartering systems, semi-autonomous local currency systems and local lending circles. None of these are utopian – all models have long histories and currently active instances. Some of the key instances include the:
    • Swiss WIR system
    • Ithica dollars / hours
    • LETS systems

    There is a great web site introducing these models:

  5. Brother Pelican

    Local currency systems are particularly entertaining because they mean that local economies aren’t totally dependent on Federal Reserve Currency. They are “off the grid”.