A Savings Bank Public Option

One of the most basic aspects of living in a capitalist society is the need for depository banking services like savings accounts. Those services should be provided as nonprofit public utility.

There are around sixty-eight million people in the United States with little or no access to basic banking services — and for those with intermittent access, it’s an expensive racket. A Pew study estimated that twelve million Americans used payday lending in 2012, spending a total of $7.4 billion in fees. The study also reveals the demographic profile of people most likely to use payday loans: black women, age twenty-five to thirty-four who are renters and are supporting children.

American banks raked in an estimated $42.3 billion in ATM fees and overdraft charges in 2015. Of course, these penalties hit poor people, people of color, and immigrants the hardest.

Postal banking, a proposal to create a nonprofit savings institution based in post offices, has been endorsed by the American Postal Workers’ Union and by Bernie Sanders, among others. A postal bank would radically undermine the exploitative payday loan industry and force other depository institutions to lower fees.

It would provide dearly needed services to struggling communities, and as Mike Konczal has argued, the existence of a cheap and high-quality “public option” can be an effective means of putting downward pressure on fees charged by for-profit banks.

While this is an admittedly small-bore reform, it has a lot of support within the political class, the academy, and the media. And it is feasibly achievable in the context of the next Democratic government or in state legislatures. But more importantly, a successful progressive campaign for public savings banks — especially one rooted in action from within postal workers’ unions — would be a victory with the potential to embolden further financial reform movements.

Overdraft charges, high ATM fees, inflated interest rates on payday loans, and exorbitant check-cashing fees are staples of daily life for the American poor and working class. A public option for savings accounts would represent a tangible and straightforward reform, a proof of concept for the broad principal that ordinary people have the ability to collectively shape their financial lives.

Financial Transactions Tax

Another reform that has been gaining steam on the Left and center left is a financial transaction tax, or as some call it, the “Robin Hood Tax.” The basic idea is an extremely small tax on each individual financial transaction. A miniscule version of this tax, .001 percent, is estimated to raise an average of $18.5 billion per year in the United States, and a much more ambitious model that follows the Bernie Sanders proposal could yield up to $340 billion per year in tax revenue.

Many economists back an FTT because of its potential to curb the kind of volatile, high-speed trading and excessive financial risk-taking that has the potential to drive speculative bubbles. The Left should welcome these changes in financial dynamics. But beyond increasing financial restraint, an FTT would be a highly progressive tax that opens the door for demands to use that revenue for universal public services.

This dynamic, the link between straightforward taxes on capital with a straightforward politics of universal benefits, could form a central plank of left financial politics going forward.

National Nurses United has showed us the method — their consistent advocacy for the “Robin Hood Tax” emphasizes the revenue that would be appropriated from the rich and distributed to the people in the form of jobs programs, universal child care, or free higher education. This framing also has the advantage of taking direct aim at Wall Street and their exorbitant profit margins as clear antagonists in the fight for a decent life in this country.

Like postal banking, financial transaction taxes have a wide appeal on the global left and center left. Figures ranging from George Soros, Pope Benedict XVI, and Paul Krugman to RoseAnn DeMoro, Bernie Sanders, and Occupy Wall Street have all endorsed some version of it. Even Hillary Clinton has supported a (comically Clintonian and watered down) form of this tax.

A Sanders-style FTT linked to some universal benefit has a clear logic and the potential for broad-based support. In an endeavor to confront a Clinton presidency from the left, this issue could be a perfect wedge that pushes rank-and-file Clinton voters towards a more progressive politics.

A financial transactions tax would not “end sexism,” but a robust FTT that devoted its revenue to universal child care, education, or paid family leave would be the most broadly empowering feminist legislation that the United States has passed in decades.

Decommodifying Public Goods

Perhaps the most crucial site for anti–Wall Street politics comes in a slightly less obvious guise: expanding the welfare state.

Leftists generally consider our demands for a more universal and liberating welfare state as grounded in principles of justice, equity, solidarity, and efficiency. We fight for socialized health care, Social Security, mass provision of public housing, and free, high-quality education because they represent a more humane and effective method of providing social goods than anything that profit-driven markets can offer.

But we need to integrate an analysis of finance capital into our arguments for a robust welfare state — attempts at rolling back financialization must include decommodification of social goods, and vice versa.

Financial institutions have historically been arrayed against pushes for a more expansive welfare state. And it’s not because they hate working people and don’t want us to have nice things (though they do and they don’t, respectively). It’s because an expanded welfare state means the decommodification of goods and services from which the financial sector currently reaps huge profits.

The fight for fair and affordable housing needs to be at the center of any twenty-first century financial politics and is key to any movement towards social equality. Our current housing system is one that consistently and disproportionately dispossesses people of color, women, immigrants, and LGBTQ people.

The 2008 crash, driven by the real estate and financial industries, devastated the American population and exacerbated the already yawning racial wealth gap. Housing forms the bulk of wealth in the United States, and while white Americans lost 11 percent of their wealth between 2007–2010, black families lost 31 percent and Latinos 44 percent. Banks like Wells Fargo have been given slaps on the wrist for obviously racist lending practices, charging black and Latino borrowers higher fees, and steering them towards subprime loans.

Not surprisingly, marginalized communities are today and historically have been at the forefront of housing justice movements. The demands for public housing, rent control, principal reduction on underwater mortgages, and public subsidies for housing cooperatives are directly tied to the lived experience of oppressed groups as well as the broader working and middle classes.

But our antagonists in the struggle for affordable housing aren’t just landlords and local planning boards. Major financial institutions hold mortgage debt on over $2.8 trillion in residential real estate in the United States. Hedge funds like Blackstone are turning foreclosed houses into rental properties and, in a move reminiscent of the activities that crashed the housing market in 2007–8, are selling financial instruments made of bundled and securitized rental payments.

The business model implicit in the marketing of these bonds is that rents will continue to rise in urban areas across the nation, further squeezing the stagnating income of the American working classes. In other words, Wall Street is heavily invested in gentrification.

The only way out of our current housing crisis is, in the words of housing activist Karen Narefsky, “Take land off the speculative market, build housing on it, and keep it permanently affordable for anyone who might want to live there.”

But the speculative market for real estate is at the beating heart of American finance capital. The real estate industry — and the financial stability of most American households — is based on the premise that the real estate values will rise over time.

Any progress made toward housing justice will cause the price of residential real estate to fall, and we need to be ready with demands for mortgage principal reduction or more radical forms of debt forgiveness if that happens. If the next generation wants to think big in terms of housing justice, it will need to reckon with the fact that financial institutions will be dispossessed in a major way and won’t give up assets without a fight.

Health care is perhaps the sector of the American welfare state in which the conflict between public benefits and financial sector profits have been dramatized most clearly in recent years. During the lead-up to the Affordable Care Act, health insurers spent upwards of $100 million in order to defeat the bill. The insurance lobby is shoveling further millions to the mind-numbingly named “Coloradans for Coloradans,” a group dedicated to stopping a 2016 Colorado ballot initiative for a state-level single-payer system. A nationwide “Medicare for all” system, such as the one touted by Sanders, would be devastating to the health insurance industry, and the financial sector will be one of our central adversaries in that fight.

Our current health care system doesn’t work particularly well for anyone, but studies have shown that women and racial minorities, even with insurance, carry greater medical debt. In a 2013 survey, over one-third of African Americans stated that they had encountered serious difficulty paying medical bills in the previous year, and a 2016 finding revealed that 29 percent of all American women also reported such difficulties. Women, particularly working-class women, are disproportionately pushed into unpaid care work when family members can’t access the formal health care system.

Again, radically reducing the profits and social relevance of the health insurance industry through a single-payer system won’t eradicate racism and sexism tomorrow. But it would certainly empower women and racial minorities more than anything that Clinton has on offer.

The fight to expand Social Security is also clearly tied into diminishing the profits and power of financial institutions.

The rise of 401(k) and defined-contribution retirement plans over the past several decades has meant increased profits and fees for banks managing those accounts. A recent study calculated that a worker making the average American wage ($32,502), saving 5 percent of their annual income from age twenty-five until retiring at sixty-seven, in a fund with a 1 percent management fee, would result in almost $140,000 in fees paid over the lifetime of the account.

And in America, the only thing worse than getting gouged by financial rentiers is not having enough money to get gouged. More than half of Americans have less than $10,000 in retirement accounts, with women (62 percent) more likely than men (52 percent) to be in that bottom bracket.

It is no wonder that the American financial industry was such a major part of George W. Bush’s push to partially privatize Social Security. One economist estimated that Bush’s plan would have seen an initial fee payout of $940 billion to financial institutions, the “largest windfall gain in American history.”

Agitating for an increase in Social Security benefits and a lowering of the retirement age — paid for by eliminating the payroll tax cap, raising the capital gains tax, and/or closing the carried interest loophole — needs to be a major piece of left financial politics over the next decades. More generous Social Security benefits would ease the pressure on Americans to invest in high-fee 401(k) plans, and provide a more secure retirement for the increasing numbers of Americans with no retirement savings at all.

Social Security is also central to undermining racial and gender inequalities. While 32 percent of elderly white people rely on Social Security for more than 90 percent of their income, 41 percent of Asian Americans, 45 percent of African Americans, and 51 percent of Latinos rely that heavily on the program, as well as 42 percent of all women. And like inadequate health insurance, meager retirement benefits mean that working-class women are disproportionately pushed into unpaid elder care.

The struggle to expand Social Security also offers a more radical horizon. The program is probably the most likely pathway by which we can enact a universal basic income. But focusing on the immediate future, Social Security remains extremely popular among the American people, and super-majorities (including 71 percent of Republicans), oppose any benefit cuts and would support higher payroll taxes as well as the elimination of the payroll tax cap.

The logic of social insurance and universal benefits are a threat to both the profit margins and ideological hegemony currently enjoyed by American finance capital. We should link our traditional struggles for a more universal welfare state to broader arguments about the power of finance in our society, and in particular the ways that financial institutions profit from and exacerbate identity-based inequality.

If we want a future that delivers a more shared prosperity and greater empowerment of marginalized communities, that future can never feature a financial sector that collects massive rents on the (currently inadequate) provision of basic social goods.

A coherent and effective left financial politics in the twenty-first century will require clarity and ease of explanation. Demands for a public savings bank system and financial transactions taxes, as well as de-commodification of public goods currently provided through financial channels, offer a path towards a better future.

The Left has an opportunity to articulate a financial politics that speaks to the stresses and affronts of everyday life under capitalism, and one that emphasizes the ways in which the financial status quo compounds the social inequalities of American society.