The lobby of the Puget Sound Cooperative Credit Union (PSCCU) in Vashon Island, Washington, is unusual for a financial institution – it looked more like the vestibule of a church 15 minutes before Sunday service. People were sipping coffee they bought from Café Luna next door, milling about the warmly lit room, having pleasant conversation and enjoying a brief respite from the gray, drizzly weather normally associated with the Pacific Northwest.
I was there with Bill Moyer, founder of the Backbone Campaign, a group that specializes in creative nonviolent direct action training and movement building, and a member of the board for the PSCCU. This LA Times article from May 2012 talks about how Bill and others in the small community of Vashon successfully organized a Move Your Money campaign, getting the community to divest from Chase bank while inaugurating a new branch of the PSCCU that took in $17 million in deposits from the community in its first month.
Vashon branch manager Patte Wagner, the former branch manager at Chase, told us that this PSCCU now holds $30 million of the community’s assets. The new credit union is a not-for-profit, member-owned bank that specializes in making it affordable for the community to have a car loan or a mortgage without excessive interest or other predatory schemes.
“50 cents of every dollar here goes directly back to the community in the form of energy-efficiency programs,” Wagner said. “That’s $15 million of the community’s money that stays right here in this community.”
It’s no secret to anyone that the big “too-big-to-fail” banks are destined to fail again. Subscribe to any investor newsletter and you'll read daily emails about the coming financial crisis and how the one percent plans to make a profit from it (my personal favorite is Shah’s Insights and Indictments). This photo I received from an anonymous source on background shows a list of prospective investments – which ones are sound, and which investments are destined to plummet. You’ll notice Bank of America, Chase and Wells Fargo are all grouped in the “Weakest U.S. Banks” section and rated as “D+,” or “junk,” as seen in the bottom box explaining each grade.
“I go to bed every night, I dream of another recession. I dream of another moment like this,” said independent trader Alessio Rastani in a BBC interview from October of 2011. “The depression in the ‘30s wasn’t just about a market crash. There were some people who were prepared to make money from that crash.”
While people and businesses are moving their private money from the big banks to cooperative banks like credit unions, one viable alternative from the Wall Street banks that states and municipalities can turn to are public banks. Currently, the nation’s only public bank is the Bank of North Dakota, which was created after an agrarian movement in the early 20th century organized for a series of reforms to protect the state’s farmers. A public bank is simply a bank chartered by any state, county, municipality, university or post office that’s big enough to hold the state’s tax revenues, as opposed to the big Wall Street banks where most states deposit their tax revenues.
“The tax collectors collect the revenues from taxpayers, and those revenues are stored in a bank ran by the state,” said Bank of North Dakota President Eric Hardmeyer in a phone interview. “Those deposits aren’t insured by the FDIC, but by the full faith and credit of the state of North Dakota."
In North Dakota – which weathered the global recession caused by the 2008 crash better than most states, due to its energy boom in the late 2000's – Hardmeyer says the bank remains very popular with the people. "We've had a few attempts to privatize it in the mid to late eighties, but they never really went anywhere," Hardmeyer said.
Germany has also mostly weathered the global recession, due in a large part to the country's strong protections for workers, and established public banks and community credit unions. Germany’s public banks are required to lend to small businesses, as opposed to the big Wall Street banks which are still stingy with small business loans despite making astronomical record profits.
As a result, Germany went from having its economy in tatters after World War II to being the world’s second largest exporter by the end of the century, next to China. Currently, Germany’s Deutschebank only has 7% of the country’s assets while community banks and public banks hold 60% of the nation’s wealth.
“Public money is such a huge pile of assets, and are at risk when they’re held in a big Wall Street bank in the event of another financial crisis,” said Ellen Brown, president of the Public Banking Institute. “States banking on Wall Street have to pay market rates for their bonds, worry about the ratings agencies, the national credit rating that’s being jeopardized by Congress, and buy into the same credit default swaps and programs that ruined cities like Detroit.”
There’s no telling when the next financial collapse will happen, but Brown, who is running for California State Treasurer on the Green Party ticket, said that when it does, the banks will loot their depositors’ accounts in what is known as a bail-in.
“Dodd-Frank stipulated that the big banks wouldn’t be bailed out with tax dollars when they fail again after a big derivatives crash,” Brown said. “So instead of bailouts, we’ll have bail-ins, like they did in Cyprus.”
Cyprus’ two biggest banks – Bank of Cyprus and Laiki – both gambled on high-risk, high-yielding Greek bonds, which went belly-up after numerous bailouts of the Euro (a monetary system that was designed to ensure constant bailouts for banks) and the Greek government’sausterity-induced economic panic. As a result, Cypriots who had money saved in these banks had their accounts looted to pay for the bank’s bad gambling debt.
Standing at a markerboard at the Backbone Campaign’s warehouse, Moyer drew a diagram of an island, with various arrows representing money streams going out of the community. Other arrows looped around the island, symbolizing money streams that stay in the community to be reinvested in the people. Bill referred to these more sustainable money streams as credit unions, public banks,alternative currencies and time banks, where units of time are used as an alternative currency.
“We have all these solutions to this system, we just need a stronger social movement to mass-educate the people before the next financial collapse,” Moyer said.
In an interview conducted by Occupy.com's publisher with journalist and author Chris Hedges, when asked what it would take for people to rise up even after a war was waged on false pretenses and the entire global economy collapsed, Hedges responded: “When the people go to the ATM and can’t get their money out.”
The banks will fail again, possibly in the next five years. The big investors are betting on it. Will we once more be at their mercy when they do? Or will we have other financial infrastructures in place so we won’t need the Wall Street banks anymore? Most importantly: can we build the social movements necessary to create that financial infrastructure in time?