End Big Banks: Save Our Economy and Our Democracy

We need to end big banks that are too big to fail and we can. We need to because they are crushing our economy and corrupting our democracy. We can because they are few in number without many allies – and growing numbers of experts and concerned citizens realize the danger that comes from having banks that are so big and interconnected that they will fall like dominoes and destroy the economy if one of them goes bankrupt. 

No task we face is more urgent. As I discussed in “Preventing the Next Big Bank Bailout,” an embryonic movement is underway to end too-big-to-fail banks. A progressive alliance can build on this foundation, help it succeed, and stay together afterwards to achieve more improvements in national economic policy.

The five biggest banks hold more money in deposits than the other 7,000 banks combined. They divert money from the productive “real economy” into the nonproductive “paper economy.” They waste taxpayer money with subsidies that enable them to reap enormous profits. And they use their political power to block legislation that would help regulate the financial industry and boost the economy.

Community and regional banks are the primary source of loans for businesses and consumers. Thanks to the subsidies the big banks receive from the federal government, those commercial banks are being driven into bankruptcy by the big banks. Since the commercial banks elect a majority of the directors of the regional Federal Reserve Banks who regulate those banks, heads of those district Feds have recently begun to forcefully criticize the industry’s move toward monopoly.  This division within the ranks of the financial industry offers a strategic opportunity for reform.

Consumer advocates, libertarians, and free market fundamentalists also share this concern about the threat to open competition. Both right-wing Tea Party activists and left-wing radicals object to government bailouts of private banks. These elements could also join a broad coalition to end too-big-to-fail banks.

To build this movement, progressive activists who focus on local issues need to devote more resources to correcting national policy. Until we deal with national policy, we’ll continue to be swamped by the misery, hardship, and injustice resulting from failed national policies. Taking on national issues is not easy, but it is necessary. By identifying achievable, step-by-step objectives that move us toward meaningful change, we can succeed.

Progressives also need to overcome the widespread animosity between liberals who want short-term reforms and radicals who want longer-term systemic change. Liberals need to “connect the dots” and better appreciate the need for structural reform. And radicals need to overcome their resistance to “half measures” and better appreciate the need to mobilize enough power to actually begin changing the system. The mutual contempt often seen in both camps needs to end, as it has occasionally in American history. Both liberals and radicals need to recognize that most people in the other camp are sincerely motivated to help reduce suffering and injustice. And both camps are needed, for they complement one another.

In his excellent article in the August 16, 2012 New York Review of Books titled “The Left vs. Liberals,” Sean Wilentz cites the Minnesota Farmer-Labor Party as a rare example of such reconciliation. We would do well to learn from this history. In my essay “Transforming the System with Evolutionary Revolution,” I offer a framework for such a synthesis rooted in “evolutionary revolution,” a phrase used by Gandhi. By achieving near-term reforms, progressive alliances can move us toward longer-term systemic transformation. Revolution is never-ending. If we are deeply committed to ongoing positive change, no victory or defeat will prompt us to withdraw.

While affirming eventual fundamental transformation in their own work, progressives can also build single-issue coalitions with others who don’t share the same longer-term goals. A coalition to end too-big-to-fail banks is an example.

A primary task we face is the need to inspire people who are largely inactive to become more actively engaged. We need to prompt them to do more than vote in elections and sign Internet petitions by offering them the opportunity to make an impact. We need more community organizers, even if most of those organizers devote only a few hours a week to their efforts. We need people who invite friends, relatives, acquaintances, and neighbors to house meetings where they can talk face-to-face, develop meaningful friendships, support one another, and discuss methods for eliciting more involvement to deal with national economic policy.

The Net-based efforts to end too-big-to-fail banks reported on in “Preventing the Next Big Bank Bailout” are encouraging. My hope is that a grassroots effort emerges soon to complement those efforts and organize people face-to-face. Following is a proposal for how to build this movement.

An End Too-Big-to-Fail Banks Alliance

Goal: To end too-big-to-fail banks in order to: 1) Help prevent another major financial crisis; 2) Avoid more taxpayer bailouts; 3) Reduce the political power of the big banks; 4) Facilitate greater investment in public-service jobs to meet pressing needs. 

Basic principles:

• In the spirit of Gandhi and King, the coalition will:

• Focus on winnable short-term objectives that build support for our long-term goal.

• Communicate respectfully without scapegoating or demonizing opponents.

• Seek win-win solutions that will be better for taxpayers, the banks, and all Americans (through negotiation and when needed compromise).

• Commit ourselves to nonviolence in word and deed during this campaign.

• The initial organizing committee will:

• Assure that the project is inclusive.

• Establish mechanisms to assure democratic control of the project.

• Operate in an open, transparent manner.

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Possible Initial Campaign 

• Form an Ad Hoc Committee for a Wells Fargo Dialog.
• Compose an invitation to the Wells Fargo chief executive, whose office is in San Francisco, to participate in a public forum on the question: How can we prevent another bank bailout? 

• This invitation would clearly explain our aim to carefully structure the forum to assure an orderly, respectful, and sincere attempt to move toward a deeper mutual understanding of the issue.

• Possible early endorsers include: Episcopal Diocese; Temple Emmanuel, Ed Lee, Nancy Pelosi, Barbara Lee.

• Possible panelists include: Robert Reich, Van Jones, Alice Walker.

• Gather broad support for that invitation.
• Present the invitation to the Wells Fargo chief executive.
• If he declines the invitation and we gain sufficient support, conduct a series of steadily escalating peaceful demonstrations designed to build support for the Dialog. 
• Encourage supporters in other cities to demonstrate at local Wells Fargo branches calling on Wells Fargo to “sit down and talk.”
• If the Wells Fargo chief executive still refuses, convene a community meeting (without the chief executive) to answer the proposed focus question: How can we prevent another bank bailout? 
• At that meeting, seek support for a proposal to break up banks that are too big to fail.
• Gather signatories on printed and online petitions and endorsements from bodies of elected officials, while engaging in peaceful demonstrations as needed.

I’ll share this article with activists in the San Francisco Bay Area, ask them for feedback, and tell them I’ll be available to assist if a diverse, member-controlled component to this movement develops. If you want to be kept informed, please let me know.

If we assure that our banks are small enough to fail without devastating the economy, release their stranglehold on our economy, and diminish their political power, we can create a sustainable economy that provides everyone with a decent opportunity to thrive.