New Report Reveals How Wall Street Impoverishes Los Angeles

6. The rapid rise in the prison population crowds out other public expenditures: America has the largest prison population in the world. Since 1980 it has grown by nearly 400 percent. Why? Obviously the absurd "War on Drugs" plays a large role. But prison also serve as the holding pen for surplus workers in the financialized economy. Because of all the downsizing, millions have turned to the underground economy for survival. As financialization continues, we can expect prisons to continue to squeeze state and local budgets.

North Dakota has public bank, Why not Los Angeles?
Cities and states are dependent on private predatory banks and financial institutions -- but less so in North Dakota which has a public bank. There, state and local government can use the Bank of North Dakota as its trustee, knowing that the bank has no incentive to rip them off by charging exorbitant fees . The bank's top executives receive neither bonuses nor stock options, and earn a small fraction of what Wall Street bankers receive.

Los Angeles is ten times larger, economically, than North Dakota and could easily develop its own bank, and thereby dramatically reduce the fees extracted by Wall Street. Also, the Bank of North Dakota returns a $60 million dollar a year profit to the state from wholesale services it provides to local banks. A Los Angeles public bank should be able to add over $600 million a year in profits to the city's coffers.

Another logical solution is for the Federal Reserve to directly purchase municipal bonds from cities and states just as it is doing right now with the toxic mortgage securities held by the largest banks. Not only would that save state and local public entities approximately $50 billion a year in Wall Street fees, but also it would dramatically reduce municipal interest rate costs.

Of course, none of this will come easy. But this report lights the way. It should be repeated in city after city, in state after state, so that everyone can see just how Wall Street is impoverishing the richest country on Earth.

Les Leopold is the director of the Labor Institute. His most recent book is How to Make a Million Dollars an Hour: Why Hedge Funds Get Away with Siphoning of America's Wealth (Wiley, 2013). His next book project is why the richest country on Earth is so poor.

Follow Les Leopold on Twitter: www.twitter.com/les_leopold

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