The Commons: A Good Bank
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.
- 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.
- 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.
- 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”.
- 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.
- 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.
- 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.
- 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