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Nov 23, 2019

Public banking is a hot topic in progressive circles. We at Macro n Cheese support it as long as it serves the public purpose, but not all visions of public banking are equal. Luckily, we have Nathan Tankus to help us navigate the shoals. In this second episode of a three-part series, Nathan begins by addressing the overall question of banks as public institutions.

All banks, whether private, public, or democratic cooperatives, are given government charters and must abide by regulations. There may be similarities in the structure of governance, but when it comes to incentives, they are very different creatures. Nathan compares the different kinds of banks, including China’s state-owned banking system and looks at possibilities for regulations and services.

Steve brings up proposals for infrastructure banks and the concept of financing public spending through a network of public banks. Some of these ideas don’t necessarily jibe with the MMT perspective; Nathan, Raul Carrillo and Andres Bernal recently wrote an article in Business Insider making the case that the federal government must pay for the Green New Deal. Full stop. The power of the federal purse is far superior to public-private partnerships or, worse, nudging the private sector to finance local public projects.

Public banks can and should provide much-needed services -- at present, state and local governments keep their funds in, and make payments through, private banks that charge astronomical fees for the privilege. (We’re looking at you, Wells Fargo.)

Nathan explains what it means to be “unbanked” or “underbanked,” as with individuals and communities who are denied services by the private banking industry. Much of this is taken for granted by those who have always had access. Banks provide a place to cash a check or receive automatic deposits from one’s employer, not to mention mortgages and car loans. In the US, the poor are crowded out of the banks and pushed towards predatory actors like check-cashing and payday lenders -- the high cost of poverty.

Public and postal banks would provide normal banking services for those who are traditionally excluded. Nathan suggests that rather than simply making loans, public banks should award grants and emergency funds to individuals.

In the second half of the episode, Steve and Nathan turn to a positive vision of the future. Steve refers to the combination of the Green New Deal, Medicare for All, a Federal Job Guarantee and a universal right to housing as an end-to-end, 360-degree plan to address inequality. Nathan looks at different aspects of each and how they are interconnected. For example, right now people migrate to a handful of metropolitan areas because that’s where they can find employment. With the job guarantee, previously abandoned communities can be revitalized, housing can be refurbished and retrofitted, and choices can be made based on preference rather than necessity.

Nathan points out that a minimum wage is a leaky wage floor; it’s meaningless for those who don’t have a job. The FJG provides a true floor, forcing employers to compete with wages and benefits.

Creating a “just transition” for unemployed coal miners will require more than FJG jobs. With the other social insurance in place, compensation will more nearly approximate their lost salaries. They will need childcare, supplemental income through an expanded Social Security or basic income, affordable housing, and free education.

In the heat of this presidential campaign season, candidates are competing for our attention with complicated proposals. After listening to this episode you’ll be equipped to unpack their promises and assess them through a true MMT lens.

Nathan Tankus is Research Director at Modern Money Network.

@NathanTankus on Twitter