How is it that a nation whose top companies hold nearly $2 trillion in cash can't afford to pay for public services or put people to work? While some underreported proposals such as The People's Budget would be a good start towards a fix, the New Economy Working Group calls for a deeper restructuring by decentralizing the financial sector away from Wall Street:
A newly released report of the New Economy Working Group, coordinated by the Institute for Policy Studies in Washington, DC, goes beyond the current debate to call for a deep restructuring of the institutions to which we as a society give the power to create and allocate money. How to Liberate America from Wall Street Rule spells out the steps required to rebuild a system of community-based and accountable institutions devoted to financing productive activities that create good jobs for Americans and generate real community wealth...
Unfortunately, most of those who hold the cash and the corporations they control have lost interest in long-term investments that build and expand strong enterprises. The substantial majority of trades in financial markets are made by high-speed computers in securities held for fractions of a second. Business pundits still refer to this trading as investment. It bears no resemblance, however, to the investment required to put people to work rebuilding a strong America.
Corporations are using their stores of cash primarily to buy back their own stock, acquire control of other companies, invest in off-shoring yet more American jobs, and pay generous dividends to shareholders and outsized bonuses to management.
The six-step plan for economic liberation restores accountability to financial institutions:
1. Break up the mega-banks and implement tax and regulatory policies that favor community financial institutions, with a preference for those organized as cooperatives or as for-profits owned by nonprofit foundations.
2. Establish state-owned partnership banks in each of the 50 states, patterned after the Bank of North Dakota. These would serve as depositories for state financial assets to use in partnership with community financial institutions to fund local farms and businesses.
3. Restructure the Federal Reserve to function under strict standards of transparency and public scrutiny, with General Accounting Office audits and Congressional oversight.
4. Direct all new money created by the Federal Reserve to a Federal Recovery and Reconstruction Bank rather than the current practice of directing it as a subsidy to Wall Street banks. The FRRB would have a mandate to fund essential green infrastructure projects as designated by Congress.
5. Rewrite international trade and investment rules to support national ownership, economic self-reliance, and economic self-determination.
6. Implement appropriate regulatory and fiscal measures to secure the integrity of financial markets and the money/banking system.
Most independent economists agree that the bloated investment banks are behind our financial ruin. Ben Bernanke needs to take his “bazooka” and enact step 1, splitting off their risk taking operations:
The “Fed’s Bazooka” is the option to break up all the banks that are “too big to fail.” Breaking up means separating the deposit-taking and lending arms of the banks from all trading, investment banking and other speculative activities in which broker-dealers engage.
The separate banking units would stand on their own with no shared liabilities. The high-risk-taking activities of one entity only affect that one entity. They take full responsibility for their actions. If they over-spend or lose too much money on bad bets, then they go bankrupt just like every other American corporation or individual.
In addition, the high-risk-taking entities would remain under Fed supervision and would be subject to the same capital requirements and leverage restrictions as those applied to traditional banks. Importantly, derivatives would be regulated and cleared through a central exchange to ensure that banks do not become too-interconnected-to-fail or take on greater liability than they can afford.
Then we can begin step 2, Banking on the Locals:
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