Why commercial banks should support a publicly-owned SuperBank in Florida.
By Farid A. Khavari
To many bankers, the first thing that comes to mind when a publicly-owned bank is proposed is "socialism". In fact, a publicly-owned bank could be the best thing that ever happened for Florida's banks, and the correct term is "Public Capitalism."
Banks seem to have rebounded since the financial crisis, and many are posting record profits. However, smart bankers realize that the current situation is unsustainable. There are only so many fees that can be charged to prop up the bottom line. Interest rates on credit cards are about as high as they can go; interest rates on CDs are about as low as they can go. Foreclosed houses and bad loans can only remain on the books for so long before they must be written down.
Combined with rising costs in other sectors, such as insurance and health care, most Americans have less disposable income each year. Millions of foreclosures and a tidal wave of unemployment have lowered credit scores of millions upon millions of Americans, shrinking the pool of creditworthy customers. Elimination and export of middle class jobs have trapped millions in low-paying jobs if they have a job at all.
Banks prosper best in a robust and vibrant economy with low unemployment and upward mobility for workers. More paychecks mean more deposits and creditworthy customers for loans. These days, banks are grabbing up the silverware as the Titanic sinks.
A publicly-owned SuperBank can create jobs by organizing and financing demand, and by reducing costs that otherwise absorb disposable income. A publicly owned bank can mop up the inventory of foreclosed homes and finance them for customers who would not otherwise qualify, by keeping low-interest short term mortgages in the bank's filing cabinet instead of reselling them. Most importantly, by monetizing new activity the SuperBank would inject billions of dollars per year into Florida's economy. As long as the money created supports new wealth-creating activity, adding money to the system is not inflationary.
Bankers understand better than anyone that new money entering the system multiplies itself rapidly, and that is good for bankers as well as for the economy. Every billion dollars injected into Florida's economy by the SuperBank creates eight billion more dollars within a year, and most of that money flows directly to Florida's commercial banks.
The new jobs created by organizing and financing demand add a growing number of creditworthy customers in Florida and new retail banking customers. New wealth-creating jobs create more jobs downstream. Reducing costs of insurance and health care, as explained in my economic plan ( www.khavariforgovernor.com ) frees up billions of dollars more for savings, investment, and debt service--and to re-circulate in Florida's economy.
Specifically, there are many things that a publicly-owned bank can do which will benefit Florida's people, Florida's economy--and Florida's commercial banks. These programs are described in detail in my economic plan:
1. Spur massive job creation through mobilizing and financing demand for goods and services which reduce long-term costs for the customer.
2. Improve health care quality and slash costs by financing SuperClinics.
3. Make home ownership affordable and possible for lower-income people, creating a new pool of creditworthy and financially secure customers.
4. Reduce student loan debt while creating jobs to make paying off student loans possible.
5. Reduce energy costs by providing low-cost financing for solar and other alternative energy products, both in new solar homes and for upgrading existing homes.
6. Finance pilot projects for restoring the Everglades, cleaning up our rivers, springs, and estuaries. Projects such as making oil from algae benefit the treasury as well as create thousands of jobs, while cleaning up polluted runoff.