AOC and Rashida Tlaib's Public Banking Act, explained - Vox - 0 views
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A public option, but for banking. That’s what Reps. Rashida Tlaib and Alexandria Ocasio-Cortez are proposing in a new bill unveiled on Friday.
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would foster the creation of public banks across the country by providing them a pathway to getting started, establishing an infrastructure for liquidity and credit facilities for them via the Federal Reserve, and setting up federal guidelines for them to be regulated.
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at some point it’s just hitting a wall where it doesn’t carry them along and they’re looking for options,” said Tlaib, who represents Michigan’s 13th Congressional District, the third-poorest congressional district in the country. “So I’m putting this on the table as an option.”
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The proposal lands in the midst of the Covid-19 pandemic, which has shed light on many inefficiencies in the American system, including banking. Take the Paycheck Protection Program, for example: It used the regular banking system as an intermediary, which ultimately meant that bigger businesses and those with preexisting relationships with those banks were prioritized over others.
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guarantee a more equitable recovery by providing an alternative to Wall Street banks for state and local governments, businesses, and ordinary people,
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The public banking bill also does double duty as a climate bill: It would prohibit public banks from investing in or doing business with the fossil fuel industry.
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“Public banks empower states and municipalities to establish new channels of public investment to help solve systemic crises.”
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If Democrats keep control of the House come 2021 and manage to flip the Senate and win the White House, they’ll be able to take some big legislative swings, including and perhaps especially on issues related to the economy.
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which theoretically would be more motivated to do public good and invest in their communities than private institutions, which are out for profit.
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encourage and enable the creation of public banks across the US. It provides legitimacy to those who are pushing for more public banking, and it also includes regulators as key stakeholders who can support and provide guidance for how those banks should operate.
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They could also facilitate easier access to funds for state and local governments from the federal government or Federal Reserve.
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“It’s basically a way to finance state and local investment that doesn’t go through Wall Street and doesn’t leave the community and turn into a windfall for shareholders,
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Public banks need the FDIC to provide assurances that it will recognize them in accordance with the bond rating of the city or state they represent.
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Tlaib recalled hearing from her constituents when the $1,200 coronavirus stimulus checks went out this spring — people waiting days and weeks for direct deposits, or getting a check in the mail only to lose a substantial portion of it cashing it at the store down the street.
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The Public Banking Act allows the Federal Reserve to charter and grant membership to public banks and creates a grant program for the Treasury secretary to provide seed money for public banks to be formed, capitalized, and developed.
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McConnell said the FDIC issuing guidance that it recognizes the city’s — and the state’s — public banks as an AAA rating would send a clear direction to the state financial regulators that the public bank is considered low risk.
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The bill would also provide a road map for the FDIC, which insures bank deposits of up to $250,000, to insure deposits for public banks, so people feel assured they won’t lose all their money by choosing to open an account with their state bank instead of, say, Wells Fargo.
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the Office of the Comptroller of the Currency (OCC) has historically been charged with chartering national banks in the US, not the Fed, meaning this is a fairly novel idea.
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It prohibits the Fed and Treasury from considering the financial health of an entity that controls or owns a bank in grant-making decisions.
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So here is the thing about private companies, including, yes, banks: The point of them is to make money, and that drives their decisions. It’s not necessarily evil (though sometimes it kind of is), but it’s just how they work.
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The idea behind public banking isn’t that Goldman Sachs, Wells Fargo, and Morgan Stanley go away; it’s that they have to compete with a government-owned entity — and one that’s a little fairer and more ethical in how it does business.
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Public banks, as imagined in the Tlaib/Ocasio-Cortez proposal, would provide loans to small businesses and governments with lower interest rates and lower fees.
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Student loans are facilitated directly with BND, but other loans, called participation loans, go through a local financial institution — often with BND support.
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According to a study on public banks, BND had some $2 billion in active participation loans in 2014. BND can grant larger loans at a lower risk, which fosters a healthy financial ecosystem populated by a cluster of small North Dakota banks.
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The Public Banking Act is meant to complement ideas such as the ABC Act and postal banking. And, of course, it’s linked to the Green New Deal, not only because it would bar public banks from financing things that hurt the environment, but also because the idea is that public banks would play a major role in financing Green New Deal and climate-friendly projects.
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If former Vice President Joe Biden wins the White House and Democrats control both the House and the Senate come 2021, the talk around these ideas becomes a lot more serious.