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The end of private banking: Why the federal government should own all banks

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I have suggested that private banking in the United States should end, and all banking operations should be taken over by the federal government. I recognize that may be anathema to those who believe the government is too big and too powerful, and that private control always is better than public control.

Yes, "socialism" has become a popular pejorative. Yet, many aspects of our life are controlled by the federal and local governments, and we are better served for this control: The military. Road, bridge and dam building. Food and drug inspection. The courts.

Private ownership can be better, but not always. Sometimes public ownership provides better service.

I live near Chicago. The previous mayor sold Chicago's parking meters and an important toll road to private industry. Parking costs and tolls immediately rose stratospherically, with zero improvement in service. The new meters are harder to use, and the road still needs work. Clearly, the people of Chicago were not well served by the transition from public to private ownership.

The private sector works on the profit motive, which often does not provide protections or service to the public.

Read the following excerpts, and see what you think about public ownership of the banking industry.

Global Economic Intersection :
Dallas Fed: Break Up the TBTF
March 30th, 2012

The Federal Reserve Bank of Dallas and its president Richard Fisher are generally known as conservative, hard money proponents. Often conservative economic thinkers are strong laissez-faire proponents. That is why the 2011 annual report of the Dallas Fed, released this month, has been such a surprise. A focal point of the report is very interventionist, calling for direct government action to force the break-up of the nation's largest banks, the so-called TBTF (too big to fail) institutions.

The focus of the report is an essay by Harvey Rosenblum, Executive Vice President and Director of Research. Key points by Rosenblum include:

[Dodd-Frank] may not prevent the biggest financial institutions from taking excessive risk or growing ever bigger.

TBTF institutions were at the center of the financial crisis and the sluggish recovery that followed. If allowed to remain unchecked, these entities will continue posing a clear and present danger to the U.S. economy.

When competition declines, incentives often turn perverse, and self-interest can turn malevolent. That's what happened in the years before the financial crisis.

The term TBTF disguised the fact that commercial banks holding roughly one-third of the assets in the banking system did essentially fail, surviving only with extraordinary government assistance.
A bailout is a failure, just with a different label.

The machinery of monetary policy hasn't worked well in the current recovery. The primary reason: TBTF financial institutions. Many of the biggest banks have sputtered, their balance sheets still clogged with toxic assets accumulated in the boom years.

TBTF undermines equal treatment, reinforcing the perception of a system tilted in favor of the rich and powerful.
" virtually nobody has been punished or held accountable for their roles in the financial crisis.
" zero interest rates are taxing savers to pay for the recapitalization of the TBTF banks whose dire problems brought about the calamity that created the original need for the zero interest rate policy.

A financial system composed of more banks--numerous enough to ensure competition but none of them big enough to put the overall economy in jeopardy--will give the United States a better chance of navigating through future financial potholes, restoring our nation's faith in market capitalism.

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End private banking. All banks should be federally owned.

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Economist since 1995. Wrote the book, FREE MONEY. Economics blog is at http://www.rodgermmitchell.wordpress.com. Also maintain a site at www.rodgermitchell.com


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The end of private banking: Why the federal government should own all banks

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The above article is the first of several articles... by Rodger Malcolm Mitchell on Thursday, Feb 27, 2014 at 12:05:32 PM
In the 1930s a different Fisher, Irving Fisher, a... by Derryl Hermanutz on Thursday, Feb 27, 2014 at 4:09:16 PM
Well said, Derryl, but of course, if the money sup... by Mark Adams JD/MBA on Friday, Feb 28, 2014 at 1:48:01 PM
The federal government should own the Federal Res... by Lance Ciepiela on Thursday, Feb 27, 2014 at 7:42:41 PM
Yes, public ownership of banking does make sense. ... by Steve Hudson on Thursday, Feb 27, 2014 at 8:21:24 PM
I'm not completely against public ownership of ban... by BravoBull on Thursday, Feb 27, 2014 at 9:01:36 PM
There is no authority in the Constitution for the ... by Jon Roland on Friday, Feb 28, 2014 at 10:08:38 AM
I can deal with this Articles intent, for North Da... by Michael Dewey on Friday, Feb 28, 2014 at 11:53:27 AM
In our "Free Market Environment", this would amou... by Paul Repstock on Friday, Feb 28, 2014 at 10:23:33 AM
That is actually what the Dodd-Frank bill did.&nbs... by Mark Adams JD/MBA on Friday, Feb 28, 2014 at 2:03:09 PM
The Federal Reserve Bank is illegal and illegitim... by Janet Gaudiello on Friday, Feb 28, 2014 at 11:30:32 AM
From the head of the Dallas Federal Reserve-"A fi... by Michael Dewey on Friday, Feb 28, 2014 at 11:55:33 AM
From the head of the Dallas Federal Reserve-"A fi... by Michael Dewey on Friday, Feb 28, 2014 at 11:55:34 AM
The problem with banking in this (and most other ... by Alice Lillie on Friday, Feb 28, 2014 at 12:27:58 PM
Let's just end the Fed.  But that does not lo... by Michael Dewey on Friday, Feb 28, 2014 at 1:30:53 PM
Alice, The Austrian gold-money idea that Rothbard... by Derryl Hermanutz on Friday, Feb 28, 2014 at 3:47:57 PM
The confusion the banking class has spread thr... by Nick Egnatz on Friday, Feb 28, 2014 at 1:34:50 PM
The three types of money typology leaves out a fo... by Paul Krumm on Saturday, Mar 1, 2014 at 11:32:50 AM
We do own the banks.  I recall US purchasing... by Davol on Friday, Feb 28, 2014 at 1:45:36 PM
The solution is not to nationalize banks, but to n... by Nick Egnatz on Friday, Feb 28, 2014 at 1:51:38 PM
The government run IRS can't keep track of the mo... by Icthelite on Friday, Feb 28, 2014 at 5:03:09 PM
The article doesn't talk about Public Banks such a... by Michael Dewey on Saturday, Mar 1, 2014 at 4:52:17 AM
Having the Federal government create our money may... by Paul Krumm on Saturday, Mar 1, 2014 at 9:53:16 AM