The Right to Fear

by Cate Morrison

An astonishing thing happened in Rhode Island last Thursday morning.

I will piece together the complicated timeline to the best of my ability, mostly on the basis of the Providence Journal reporting.

9:00 am: Donald Morgan is being transported to a court appearance for vehicle theft by a state trooper, when the trooper stops to assist a car crash. While handcuffed but unsecured, Morgan gets into the driver’s seat of the police cruiser and drives away. The cruiser is located by GPS and found abandoned. According to an eyewitness, 40-50 police officers descend on the scene.

(roughly) 10:30 am: A call goes out over police radio to be on the lookout for a “white Ford F150” with “something hanging out the back.” A Cranston police officer assumes the truck must have something to do with Morgan. He then sees a white Ford F250 “driving erratically,” and pulls the driver over. The driver stops, but then drives on. The Cranston officer loses sight of the truck.

At some point, so far unclear, Providence police officers spot the truck entering I-95 north at the Providence Place Mall. What follows is an astonishing show of force.

There are unofficial estimates of 30-40 marked and unmarked vehicles that converge on the truck. Bystanders said the police officers themselves were driving in ways that would endanger the public.

Penned in by police vehicles, the driver attempts to first reverse and then go forward—though from videos, it is unclear if the lurch and drive forward is intentional or if Joseph Santos has already been shot dead with his foot on the pedal. Officers open fire on the truck’s cabin. Driver Joseph Santos is killed. Passenger Christine Demers is critically wounded. At this point, 5 Providence police officers and an unspecified number of state troopers all opened fire at some point at Santos and Demers.

They had nothing to do with Donald Morgan. They were unarmed.

Five officers were involved in the shooting, according to police officials. Estimates from bystander videos suggest 40 rounds fired.

When I first heard the story, my first mordant thought was “how soon will the victims’ arrest records be released?” The answer was a bit over 24 hours. The ProJo online headline announced “Police Identify Two Shot Thursday on Highway On-Ramp.” The identification was solely legal—the lead: “Both Joseph J. Santos, 32 and Christine E. Demers, 37, who remains hospitalized, had extensive involvement with law enforcement and the courts.” The following texts struggles to substantiate the claim. The records were revealed for the sake of shaming the victims, but they told of a far more disturbing pattern of human suffering at the hands of the law—where small infractions, petty arrests and add-on charges snowballed into more and more time, warrants and infractions, and struggles with addiction became criminalized. These were no great dangers to society, and given the number of officers responding, were also not threats to specific members of the public at the time. The chase was officer-initiated, sustained and heightened.

Aristotle, in his account of the emotions, comes to a very uncomfortable conclusion about the connection between individual and social feeling. Some people have rights to emotional responses that others do not. Deprived of a social standing that could be threatened, the slave cannot feel anger. Daniel Gross explains it as an economy of emotion, where social collectives invest concern in some and not others, and a system of not rationality but reason. There are reasons to be hopeful, angry or afraid, and to feel kindness, shame or admiration. Before even the word, emotional response expresses a rough system of judgment. One is worthy of pity, another indignation, some feared, others admired—this tells us about the originating reason of the world before it is laundered into more genial types of justification. My reaction tells me about what I am before I even know what I think. If I’m angry, you cut me down without cause. If I’m afraid, you can, want to and will cause me harm. If I am kind, I want to help you for no benefit to myself when you need it.

There is a caveat. The emotions are social. Some people have the right to feel. Others don’t.

What did Joseph Santos do to die, and Christine Demers to be gravely wounded? At most, Santos drove badly and Demers did nothing. They panicked after an initial stop for driving a white Ford truck, triggered by a fallacious state-wide bulletin. They then had police from several different towns and jurisdictions swoop down on

The enabling conditions of fear are a presumption that a) someone or something has the ability to hurt you, b) that it wants to or is going to hurt you, c) that it is close by and thus can hurt you. Santos and Demers both knew about the ability for the law to hurt them. They knew that they were being pursued with sudden, unexplainable and overwhelming force. They found themselves surrounded by this force without any way to understand why, when even bystanders were astonished. They were right to be afraid, to act in ways that are extreme and unreasonable, but their actions became instead justification for their nearly inevitable deaths once the horrible machinery began moving.

We know that the reaction of fear is deemed generally socially acceptable, because one of the most common responses to officer-involved shooting is that they feared for their lives or for those of members of the public, and thus deviated from standard practice.

Fear, however, is granted to some and not others. Santos and Demers were not allowed to fear. They weren’t given the benefit of the doubt.

What happens to members of public who fear for their lives? Why do they have no right to fear?

When police officer shootings occur, the feeling of fear is processed through its reasoning. The suspect was capable, willing and realistically in that situation able to hurt you. The specific Providence police were wound up and ready to fire on who they believed to be Donald Morgan. But Donald Morgan wasn’t there. It was two people with a history of petty crime, wrung through an uncompromising system, who got scared and tried to run when an unimaginable phalanx of police descended on them. Overwhelming force came down upon two people who had done nothing to deserve such a response.

They panicked. The officers did not. They killed with absolute control.

I thought that the body cameras and bystander films would show a scene of chaos and confusion. They did not. Officers cover the truck and systematically shoot into it, calmly and in formation. The videos show an execution.

We ask—how to process a mass shooting? How do we even comprehend a person shooting 26 in a church or 58 at a concert. We have a far greater vocabulary, though, for a single person shooting dozens of people than we do multiple people shooting 40 times at two unarmed people, whose greatest crime was panicking. What do we say then?

Cate Morrison is senior lecturer and director of debate at the University of Rhode Island.

Photo credit: ABC news, from bodycam footage.

Advertisements

Sears CEO Eddie Lampert F***ed Up & My Friend Paid for It

by Matt

Over at Occupy.com, you’ll find my new essay on the fallout from Sears’ financial debacles (the result, among other things, of Lampert’s decision to do stock buybacks instead of, umm, maintain and repair the physical stores where people were actually showing up to buy things). It’s a personal essay, because my friend, a married father of several young’uns, is now unemployed because of Lampert’s bungling. It’s also an essay about morality. And that’s been on my mind for the last several months: the way that it’s really impossible to have a coherent normative or prescriptive moral theory when one’s practical moral culpability is inversely proportional to the amount of money one has. So give it a read and a share, okay? And I’d love to hear your own thoughts on the way class differences fuck up our ethics.

A Quick Q&A: Phil Murphy & Public Banking

by Matt Stannard

Q: Phil Murphy campaigned for New Jersey Governor –and won– on a public banking platform. What’s a public bank?

A public bank is a state- or city- (or other government entity) owned bank. The bank typically takes as its deposits the revenue or holdings of that government entity (such as taxes). The bank then lends to various entities and can do so at low- or no-interest, in order to finance public goods.

The only significant public bank in the U.S. now is the Bank of North Dakota. BND is one of the most powerful and solvent banks in the country, and it makes low-interest loans to the state for infrastructure; to municipalities to build schools and repair things; to farmers; to students (it supports student loans and offers good refinancing options); and to small businesses. BND supports community banks in North Dakota, and because of it, the state enjoys the healthiest small banking sector in the country.

There are public banks, or strong public banking sectors overall, in other countries like Germany and Costa Rica. Germany’s public bank has helped finance that country’s cutting-edge post-carbon energy transition.

A public bank has been a central piece of Murphy’s economic agenda, rather than just some idea he’s casually mentioned. He’s a believer, which puts him in a small list of good company that includes Bernie Sanders.

Q: Why do public banks have such potential?

Banks, whether private or public, have the power to create value through fractional reserve lending. Although it’s somewhat misleading to straight up say banks “create money out of nothing,” they sort of do that: If I borrow $10,000 from my local bank, it’s not like they go downstairs to their vault and bring out $10K in cash to give me. They essentially create $10K in credit. I pay them back with interest. That’s how they make money.

The theory behind public banking is: “Banks have a lot of power to generate public value. That power should be treated as a public utility, not just a private business.” Private banks have to make profits to satisfy their shareholders. Public banks make a (small) profit too, but that surplus can be paid back into the state or city coffers, essentially creating dividends for residents, all the while lending in the public interest.

Public banks keep communities financially healthy in hard times because their economic benefits run “countercyclical,” lending at low interest when private banks won’t lend even at high interest.

Public banks also help break state and local governments’ dependence on risky Wall Street finance. Had a public bank been in place in New Jersey starting around twenty five years ago, it could have helped the state save over a billion dollars on pension fund fees alone.

Q: But I thought Murphy had been a Goldman Sachs executive. Wouldn’t Goldman Sachs hate public banks?

I wrote about this question a year ago when Murphy announced his candidacy, in an article entitled “In Praise of Class Traitors.” I interviewed my former colleague at the Public Banking Institute, Ellen Brown, who speculated that a person from the financial sector might be exactly the kind of politician with the credibility to push a public bank. “Our biggest hurdle has always been that legislators don’t understand how banking works,” she told me. I also interviewed socialist economist Rick Wolff, who said Murphy probably “knows what shenanigans go on in big banks and investment houses like Goldman,” but that “as a Democrat, he cannot attack pensioners the way other, especially Republican governors have,” and that a public bank would, among other things, be “less politically costly” than letting pension plans burn.

Q: Why should we trust Murphy? Once a thief, always a thief, right?

I’ve already seen many of my friends on the left express skepticism about Murphy based on his banking pedigree. I get it. That skepticism is healthy. But Murphy is Governor of New Jersey now whether we think he should be or not, so let’s see what happens. He wouldn’t be the first person of privilege to facilitate egalitarian economic ideas. He wouldn’t even be the thousandth.

Q: How hard will it be for Murphy to actually establish a public bank in New Jersey?

There will certainly be a lot of hurdles to overcome. The legal hurdles will likely revolve around New Jersey’s constitutional prescription against the state “lending of credit.” But overcoming that hurdle will be relatively easy, Such provisions didn’t prevent North Dakota from running its own banks, and several other states (and Puerto Rico) have quasi-public infrastructure banks that offer loans and credit assistance to public and private sponsors of construction projects. After all, in the status quo, Governments deposit their revenues and invest their capital in private banks. Those banks, in turn, lend money–but they aren’t “lending the state’s credit.” The banks lend their own credit, which is distinct from the “credit of the state.” This distinction may seem complicated, but it’s good enough for the courts. Throughout the 19th century and in reference to the Bank of North Dakota in the 20th century, courts have agreed with states’ efforts to have public banks lend money instead of private banks.

The larger hurdle will be political–and this is where the public banking movement often flounders. Opposition from the private banking sector will be fierce. Wall Street will lie, steal, and cheat to discourage public officials from opening public banks.

What will be needed is a mass movement of people in New Jersey willing to write letters, make phone calls, and physically show up to demonstrations in favor of Murphy’s efforts (assuming Murphy goes forward with a public bank). It’s not like there will be many counter-demonstrators. But public officials are risk-averse, and there will be rich people in suits telling them not to do it.

In other words: Public banking is a good idea, but being a good idea is not enough. It’s not even enough, in an age of Wall Street hegemony, to be the Governor of New Jersey and push for a public bank. You need lots and lots of ordinary citizens willing to keep issuing the demand loudly and clearly.

Q: Where else are people pushing for public banks?

All over the place! City governments, spurred on by local economic justice coalitions, are exploring public banking all across California. Santa Fe, New Mexico is in its third stage of policy study on implementing a public bank. There are vocal movements and sympathetic public officials in Washington, Oregon, Hawaii, New York, Illinois, Pennsylvania, New Hampshire, Maine, and at least a dozen other states. Whether they succeed or not will depend on whether they have behind them large coalitions of people willing to push past the resistance they’ll encounter from big banking interests.

Q: Will a public bank usher in an era of egalitarian, socially responsible, progressive economic policies?

This is a good question–and the answer is another reason why public banking requires a mass movement in order to work effectively. Public banks in and of themselves are not a guarantee of good economic policy, and are especially not a guarantee of economic justice. For all the positive aspects of the Bank of North Dakota (disaster relief, support for farming, building schools and community centers on the cheap, supporting local business development), that conservative state has used its socialist bank to do things like finance fracking and a toxic oil economy. The BND even financed police repression at Standing Rock last year through its emergency financing program–probably the most depressing and hurtful use of public financing we’ve seen in a long, long time.

The lesson here is that public banks are tools, and whether a tool is used to build good or evil things depends on who wields it. But in the hands of a democratic government committed to transparency, ecological sustainability, and socioeconomic justice, a public bank can do incredible good.

Matt Stannard is a legal and policy advocate for sustainable farming and cooperative economics. He previously served on the board of directors of the Public Banking Institute and was policy director for Commonomics USA.

Brief Note on Exploitation and Abuse

We all have needs and lacks, some because of the system, some because we’re hardwired to have them, some because of trauma, some just because of ordinary life experiences. There are healthy ways to take care of these needs, account for and address (or resign oneself to) the lacks, generally to function and meet needs in a healthy way. It’s clear that most of us don’t know how to do that in every instance and many of us don’t know in any instance. We are constantly damaging, exploiting, and abusing one another, and we do damage to others commensurate with our position in social and economic hierarchies.

When we abuse, harass, or exploit, we’re using other beings to fulfill those needs without behaving requisitely ethical–without their consent, or without just compensation, or without considering their needs and wants, or without repairing or restoring what we have taken.

This causes great damage. Sexual abuse and harassment ruins people, families, communities. Economic exploitation ruins people, communities, regions.  Ecological exploitation ruins communities, regions, the planet. Each form feeds from and to other forms, so that being sexually abused messes up your economic life, ecological destruction creates scarcity that makes economic and sexual exploitation more likely, economic exploitation reproduces itself in cultural norms like hypermasculine competitiveness, and so on.

Each of these forms of abuse and exploitation is unique and requires commitment to unique processes to address it. But there are common forms to the processes required to address all of them. Each requires (1) a personal commitment to do what we can to address them; (2) an understanding of how we–I, personally, and we, collectively, are part of the problem and necessary for the solution; (3) concrete materialization of abuse- and exploitation-free culture and structures.

Cooperativism, whether economic, cultural, political, or in all manifestations, has to begin with that commitment, because what we’re really addressing is that dynamic of exploitation and abuse, patterns which cut across everyone and everything in a world of hierarchies.

~matt

 

Resisting Prison Labor

by Matt

Black Agenda Report: “Prisoner rights advocates will converge for what aims to be the largest abolitionist demonstration in U.S. history, [Saturday, August 19], in Washington D.C. The Millions for Prisoners’ Human Rights March is centered around the demand that the exceptions clause, which allows for slavery to continue in United States prisons, be removed from the Constitution’s 13th Amendment.”

Since we’re in a period of heightened consciousness about slavery and its legacies, this is an especially important time to talk about compulsory prison labor, or, more bluntly, prison slavery; enslavement of incarcerated people.

I have no desire to break down the components of the moral case against slavery, but must at least partially do so to point out how enslavement of the incarcerated is an especially nefarious kind of human exploitation.

Labor produces value. Prisoners’ compulsory–or even very-low-paid–labor facilitates the production of value for privileged entities (the state, private corporations who get in on the action) and extracts that value, working the body and mind of people at their most vulnerable. Not even the weak justification for the wage system (people are free to walk away and find other work, live in other labor communities) is present in the context of incarceration. I believe this all amounts to something foundationally evil and unjust, which bypasses whatever moral judgment may fall on the prisoner. I’m betting most people reading this believe the same.

Nazism, the Confederacy, China’s authoritarian capitalism, all have slave labor as their material foundations (so does Classical Greece, but that’s another post). That’s the backdrop of Nazis in Charlottesville, and prison labor is another head of the Hydra.

The Black Agenda Report piece by Kyle Fraser summarizes the corporate and governmental profiteering that steers the prison labor ship, and is a good starting read. Last year’s Think Progress piece by Carimah Townes is a longer and more detailed read, definitely worth the time.

Confederate statues should be removed because they are non-living remnants of slavery. Prison labor, on the other hand, should be abolished because it’s a *living* remnant of slavery.

Photo By Royalbroil – Own work, CC BY-SA 3.0, at Wikimedia Commons

How Racism and Capitalism Work Together in Policing

by Matt Stannard

Municipal and state police forces’ use of intimidating and lethal superweapons is a result of the private, for-profit production of such weapons and accompanying lobbying to create policing policies that favor those weapons. But that production and distribution couldn’t work except over a backdrop of anti-Blackness, and the ability of police ideologists to interpret disadvantaged neighborhoods and the trauma of historical oppression as Black criminality.

Racism and capitalism work together in tandem again in the training of police officers by private training firms with the same material interests as the weapons makers. The fastest way to turn police forces into consumers of those weapons is to teach cops that they need to be very, very afraid of people of color. The obvious solutions are to take control of the situation and eliminate any threat to the safety of the officer as quickly as possible. This imperative, propped up in the consciousness of police officers even if they aren’t overtly racist, must be constantly replenished.

Matt Stannard is policy director for Commonomics USA. 

Photo: By Daviskorn at English Wikipedia – Fed Up Queers, Public Domain

A Stakeholders’ Case for Public Banking and a Public Cannabis Bank in California

by Matt Stannard and Marc Armstrong
Commonomics USA
Presented to Cannabis Banking Working Group, Los Angeles, California, August 10, 2017

As our organization, Commonomics USA, is concerned with policies that prioritize the commons, we talk a lot about stakeholders. Stakeholders are also an appropriate place to start in this meeting, because neither a Cannabis Banking Working Group nor a special session on public banking would exist but for strong public demands: for a policy of legal recreational cannabis, for financial protection and security for the MRB industry, and, as we’re seeing throughout California, for public banks.

 

 

When viewed from the lens of stakeholder needs, the question becomes what banking system creates security, predictability, opportunity, and sustainability for the primary stakeholders in California’s transition to a new cannabis economy. Those stakeholders are (1) California residents, who voted to regulate rather than prohibit recreational cannabis, but want to be free of crimes, including financial crimes, associated with marijuana-related finance and commerce; and (2), California marijuana-related businesses, of whom many cities are paying special attention to businesses emerging from communities historically victimized by the war on drugs.  In Commonomics USA’s experience, publicly-owned and maintained systems often do a better job meeting those particular needs–security, predictability, opportunity, and sustainability–than privately-owned systems, for the greatest number of stakeholders, and especially for disadvantaged stakeholders.

California needs a solution to the cannabis banking conundrum by January 2018. As statements to the Working Group have established, private banks are reluctant to “touch” cannabis money absent a prior “first touch” by the State of California. Although it is unclear whether the federal Department of Justice has the resources or political capital to hinder commerce in states that have legalized recreational cannabis, and experts have told this Working Group that the Cole Memorandum and FinCEN guidelines might “prove to be more resilient” than many suppose, federal prohibition is vexing, particularly with respect to financial transactions for MRB money, and especially against the backdrop of a DOJ led by a vocal critic of recreational marijuana.

The legal and policy context for these problems is ambiguous and unpredictable. The federal government has not explicitly asserted that states cannot set different controlled substance schedules and policies. As legal scholars have pointed out, certain provisions of the CSA seem to anticipate this. Moreover, the United States Supreme Court declined to hear an objection to state-level legalization from other states. Meanwhile, the state of California collects taxes and fees from California MRBs now and will continue to do so no matter how this Working Group answers the banking questions. The federal government, through the Department of Justice and Department of Treasury, has not seriously questioned the tax and fee revenue from California MRBs and there has not been a distinction between tax and fee revenues from medical and recreational cannabis .

This raises interesting philosophical questions: When the state government touches that money, what is the legal basis for it being clean enough to be deposited in a bank? Is the state compromising its fiduciary responsibilities by assuming that these monies are not at risk of seizure? Is mixing tax receipts between different industries merely perpetuating the obfuscation and lack of transparency of an underground economy? We ask these questions because we believe that the legal basis for the state’s ability to legitimize cannabis money needs to be built and made explicit.The federal government has jurisdiction over interstate commerce, but California needs to develop the legal and policy framework for in-state commerce of a product that is federally illegal and, in the case of recreational cannabis, potentially the target of federal hostility. A public bank solution will allow California the opportunity to express the first iteration of the terms of any such answer–by asking the administration and the Federal Reserve banks whether the policy objectives of federal financial crimes and drug laundering laws favor a centralized state bank in the driver’s seat, or a continuation of the decentralized, ad hoc, and often surreptitious practices of cash collection and quirky experiments by small private banks.

Rather than looking at this as a cannabis problem, this is really a banking problem–a problem of the inability/unwillingness of the private banking sector to address both a segment of the population and a pressing social need. That’s a familiar situation for those of us in the banking and public policy world–particularly those of us interested in public banks. In fact, as California stands at the precipice of a cannabis banking crises, it is also immersed in two other banking crises, slow-burning problems that hurt the state’s communities and its economy. The first is the economic toll that big private banks have taken on the state. California’s state and local treasuries have suffered greatly under the interest rates and fees charged by big banks, the costs of financing infrastructure and development, and the reluctance of private finance to fund the kinds of development Californians need. Capital appreciation bonds saddling school districts with interest charges that dwarf the size of the principle are probably the most egregious, but the results are the same: costly public financing, lack of access to financing for public sector goods, and a cynical sense that we can no longer afford to fund good ideas.

The second banking crisis is the unavailability of basic banking services to so many Californians. According to the 2015 FDIC National Survey of Unbanked and Underbanked Households, almost 900,000 residents of the state lack basic banking services, and thousands more — over 19% of households — are “underbanked,” meaning they subsist financially with short-term and very expensive services. Lack of access to affordable services contributes to financial precariousness and insecurity, which is harmful to the individuals, families, and communities affected, and a barrier to sustainable economic security across the state.

So privately owned banks seem to trip over a number of market failures, of which cannabis revenue is one. The reasons may be different–in the case of cannabis revenue, a heavy-handed federal government–but the common denominator is that the tendency to view banking as merely a business opportunity rather than a public utility has meant and will continue to mean that huge populations are unserved, and huge public needs unmet.

But the State of California stands in a unique position to take on these challenges. California is the sixth largest economy in the world. Policy-wise, it has pushed itself ahead of the federal government and much of the rest of the nation on policies from post-carbon energy to family leave, from struggling to forge a universal health insurance system to protecting immigrant communities. New government-owned, nonprofit JPAs are being formed to produce renewable energy. One might say California is forging a new economy. We think a new economy needs a new bank–a bank of its very own, that leverages the power of banking based on deliberative policy objectives rather than using profit and loss as a starting point for financial policymaking.

After studying public banks and public banking campaigns for many years, and listening intently to the discussions in these Cannabis Banking Working Group meetings, as well as several divestment and public banking meetings across the state, we offer this four-stage proposal as a starting point for discussion.

The first phase would be the drafting and legislative enabling of a public bank: The Department of Business Oversight would define a Public Bank Charter for a depository bank serving the unmet banking needs of the California public. California’s legislature would pass the enabling laws to support and protect this bank license. In this phase, the state would develop a business plan as part of its application to the Federal Reserve Bank of San Francisco for a master account number. We believe that this phase can begin immediately and, as a matter of fiduciary responsibility, would lower the risk of the subsequent phases. Should the Federal Reserve Bank of San Francisco grant the master account to this public bank without a fight, the landscape dramatically changes.

The first phase also includes capitalization. Many possibilities exist for capitalizing the bank, including debt or equity financing, issuing corporate bond and pension funds with the cannabis industry or the general public stepping forward to participate; or even constrained common stock in the fashion of the ownership of the Green Bay Packers.

In the second phase, the state bank creates depository services for MRBs and the unbanked and underbanked. Limited commercial account services could include demand deposit account services, cash concentration services, depository reporting, and automated payroll deposits for employees. Core, low-cost, retail banking services for the un- and under-banked market could include simple transactional and savings accounts, automated payroll deposit, peer-to-peer money transfer, international remittances, and debit cards. Low-cost methods used to access bank accounts could include online devices, existing ATM/Kiosks, and mobile phones.

In the third phase, the bank develops its capacity for risk management, compliance automation, and payment automation. The objective would be to lower the cost of compliance by using analytics and monitoring software to provide important reports using automated procedures and monitoring products. This Working Group has already heard about these capabilities from other participants. These products will provide greater transparency to the financial system. These participants have also mentioned payment automation capabilities, and we recommend that this phase includes this important technology. This can be done with an app that would complete payment transactions between cannabis consumers and cannabis businesses with an account at the public bank. If necessary or desirable, it could avoid the VISA, MasterCard and American Express network and transfer funds from the buyer’s California bank account to the seller’s account in the public bank.

In the fourth phase, the bank provides credit, lowering the cost of public financing, using public credit instead of taxpayer money or municipal bonds for the construction of schools, toll bridges, water and sewer systems, and a sustainable post-carbon energy system. Many additional public goods require financing and have huge social and economic payoffs, from affordable housing loan programs (including loans directed to public employees), that help people live in the same communities where they work, to loans for cooperative startups. The bank could also use its public credit to provide lower costs to wage earners saddled with student loan debt, helping a demographic that has, by many measures, gotten a raw deal in California.

There are four main benefits that a public bank can provide:

  1. Satisfies unmet market needs. In the event of market failures, when private banks are not able to meet the needs of the banking market, a public bank is able to be used to fill in the gaps, to provide deposit account and credit services where there are none.
  2. Cost savings. A public bank has a lower cost of doing business (no bonuses, no extreme salaries, no dividends, etc.) that can be passed on to borrowers, whether students, businesses or municipalities.
  3. Economic sovereignty. A public bank is a democratic approach to public finance, involving both the public and other stakeholders in the loan portfolio decisions.
  4. Counter Cyclicality. A public bank’s equity is not publicly traded on a stock market and is not subject to the same changes in valuation in as rapid a pace as we saw in 2008 and 2009 stock market, where some banks lost upwards to 80% of their equity. Because of this, public banks have the ability to continue to make loans precisely when private banks are terminating lines of credit, ending loan programs, and not accepting deposits.

Some folks, including a public official or two, are tired of public banking advocates bringing up the Bank of North Dakota. So we will only bring it up to explain that there are many roads to banking democracy This proposal, as presented, does not suggest transposing the BND model onto the State of California. It isn’t a proposal to use California’s assets to capitalize the Bank or to seek partnership with or underwriting of the private banking industry. In the wake of natural disasters, BND has the ability to make bridge loans to businesses and homeowners before they are reimbursed by FEMA and suspend mortgage and student loan monthly payments. In 2015, BND obtained more than $2.5 billion in public deposits through pledging services for private banks, in addition to providing $679 million of liquidity through BND’s secured and unsecured federal funds lines. Our proposal doesn’t preclude any of that, but it doesn’t require any of that.

The process outlined in our proposal should occur in tandem with the ongoing effort to relax federal law, consistent with the recommendations of Erwin Chemerinsky, Jolene Forman, Allen Hopper, and Sam Kamin, in their UCLA Law Review article “Cooperative Federalism and Marijuana Regulation.” Passage of the SAFE Act, a robust reaffirmation or strengthening of Cole-style and FinCEN guidelines, all as part of the ongoing effort to reach out to rational federal policymakers–who we believe really do outnumber the louder and less reasonable voices in Washington. California is likely to make that request to the federal government anyway. But doing so having created a public bank in the world’s sixth largest economy, a bank committed to financial oversight of cannabis banking as a matter of public policy, creates a very different context for the dialogue between the federal government and the states concerning cannabis.

Similarly, if it is to find any “banking”-based solution to MRB revenue’s federal illegality, California will inevitably have to face the question of obtaining a Master Account Number from the Federal Reserve Bank of San Francisco. Why not, then, have the State of California itself, on behalf of a state-owned bank with unprecedented control over the cannabis economy, make that application?

Most people in this room understand the general case for public utilities meeting unmet market needs and, specifically, public banking doing the same. As movements in Oakland, here in L.A., and in other parts of the state suggest, there is widespread support for exploring public banking in California. But the reason we’re having this conversation, here with the Cannabis Banking Working Group, is that this is a “try or die” moment for the cannabis banking question. Some entity or collection of entities must inevitably dialogue with the sources of current federal complications concerning cannabis banking. From a stakeholders’ perspective, we believe it makes a lot of sense for that entity to be the State of California–affirming the decisions the people of the state have made, owning those decisions.

This is a chess game, with economic sovereignty being the big win for California. Understanding the possible moves that the federal government can make is critical. We assume, for instance, that recreational cannabis tax revenue can be collected and placed in one of the state’s accounts in a private bank. What if, in the Attorney General’s quest to disallow recreational use of cannabis, this regulation is changed to disallow this recreational cannabis tax revenue from being legally deposited in private banks? California can collect the tax, but it’ll end up with the same banking issue now experienced by MRB’s. There will be yet another run on pickle barrels, only this time the state will be buying them.

What is needed is a body of state law that creates a Public Bank Charter (or license), defines “municipal affairs” for state charter cities, sets standards for in-state commerce of recreational cannabis, and protects Californians so that they may conduct safe economic transactions in the currency medium of choice.

A public bank can then be created in order to act as the organizational bulwark, protecting California’s interests by meeting unmet market needs and issuing deposit accounts to MRBs and the unbanked, efficiently handling the federally mandated compliance issues, automating payments (including tax payments), and making California’s economic sovereignty a reality.

A public bank acting as a necessary public utility that provides banking services to MRBs, to the unbanked and underbanked, and for lower cost infrastructure and commercial financing, can help California use its status as a global economic power, and its huge economies of scale, to create the appropriate financial infrastructure necessary for this undertaking. The decision to create such a bank as a solution to the cannabis conundrum would send an unprecedented signal to the world that California is stepping into a new cannabis economy and a banking economy that meets the needs of all Californians, businesses no matter the industry, and municipalities.

Matt Stannard is policy director of Commonomics USA. Marc Armstrong is president of Commonomics USA. 

Cannabis and Public Banking: the Upcoming California Treasurer’s Meeting, and Me

by Matt Stannard

I will give a public presentation to California Treasurer John Chiang and his Cannabis Banking Working Group on August 10 in Los Angeles. The meeting will be held at the Sheraton Gateway Hotel on Century Blvd. It will start at 9:30 a.m. and is expected to go until 1:30 or 2:00 p.m. The meeting is open to the public and is expected to be webcast live. My colleague Marc Armstrong, president of Commonomics USA, will join me at the table for questions and answers following my presentation to the Working Group.

Given the scope of the question–whether the State of California should open a public bank–and the fact that the State Treasurer has called this meeting solely to discuss public banking, we could easily call this the “biggest” official meeting about public banking, ever. Its scope is unprecedented and the event itself is a “surprise,” originally not part of the series of Working Group meetings and added only after the Working Group heard several public comments on public banking at its previous meetings.

John Chiang’s staff informed us that other presenters for the August 10 meeting include Gwen Hallsmith of Global Community Solutions, Auburn University Professor James Barth, Colorado Bankers Association president Don Childers, and former Massachusetts Bank Commissioner David Cotney. We expect that some of these participants will be arguing against public banking, but the format of the hearing is not adversarial.

MRB banking has been on the radar of the public banking movement before, but many of our earlier assumptions were naïve concerning how cleanly a state-only cannabis economy could break free of federal banking oversight. After extensively researching that oversight, the team at Commonomics USA determined that, while not a magic bullet (there are no magic bullets on this question), a public bank would be a strong candidate for containment and management of legal risk, and serve as a conduit of states’ independent approaches to cannabis policy and the multibillion dollar windfalls of recreational legalization.

The heavy-handed rhetoric of the current United States Department of Justice and its Attorney General threatening pushback against California and other states is a significant departure from the imperfect but significant attempts by the previous administration to work with states. The Cole Memo, currently under review, and the FinCEN guidelines both provided some degree of predictability concerning the federal government’s Controlled Substance Act enforcement priorities. Licensing a public bank with robust monitoring and compliance resources, as the “first touch” for state MRB revenue, would be a responsible, good-faith gesture amidst current federal unpredictability.

We believe the State of California, or a charter city in California, should create a public bank that will provide accounts to marijuana-related businesses (MRBs) with top-level monitoring security, and legal compliance. Such a bank can also provide accessible services to California’s unbanked and underbanked residents, and provide credit for public projects and services to lower the cost of public financing and meet the structural and service needs of Californians, reducing the state’s reliance on both Wall Street and the federal government. California should immediately create and submit a business plan to the Federal Reserve of San Francisco in application for a Master Account Number.

Given the Federal Reserve Bank of Kansas City’s recent reluctance to provide an account number to a small, private credit union in Colorado that intended to serve MRBs (a case we at Commonomics USA have been following very closely), there will be legal challenges and some resistance to overcome to make this happen. Our position is to embrace that challenge and fight for a public bank, whether that means convincing the Federal Reserve, convincing the courts, or changing the laws.

As Marc said to me recently, “a central argument of ours is that, when it comes to the cannabis market, the people have spoken and it’s up to elected officials not to do what the DOJ is doing, but to make the market as transparent and accountable as possible, with individuals and legal organizations acting responsibly and above-board. Enough with the intrigue, innuendo, threats and dangers to public safety. Time for an open market that has readily enforceable standards and with deposit accounts for every licensed MRB.” And–if the people of California want it–a public bank to utilize MRB revenue for public goods.

We hope for a strong public presence in support of public banking at the August 10 hearing, both inside and outside of the venue and in the coming days will make information available on local organizing efforts.

Matt Stannard is Policy Director at Commonomics USA. 

Public Banks and Credit Unions: What’s the Difference?

by Marc Armstrong

Anything that takes control from Wall Street banks is viewed by many as a positive development. Public banks, credit unions, and, to some extent, the new fintech firms all do this: they change the competitive landscape and provide a variety of services that appear to compete with traditional banks. Two of these players, public banks (of which the Bank of North Dakota is presently the only one in the United States) and credit unions, are considered by some to be in the same space, but they are actually quite different. This post will map out some of the key similarities and differences.

Public banks are government owned entities that act in a not-for-profit capacity to finance public goods, with their earnings passed back to the people in the form of lower interest rates on loans or government dividends. Public banks have many measures of democratic control, such as a more participatory form of governance. But since low interest rates on loans and local control are also the hallmarks of credit unions, what are the differences between public banks and credit unions?

The main difference is distinct and important: Thanks to the banking lobby, federal law prohibits credit unions from making commercial loans that exceed 12.25% of their total assets. This is a significant limitation that keeps credit unions out of the core business of banks: issuing credit. Of course credit unions can make consumer loans and mortgages, but this focus on member loans, savings, and other consumer-oriented services places them in the same market as most retail banks.

publicbankingworksPublic banks, on the other hand, are in decidedly different markets: commercial lending and public finance. They can ignore the retail sector entirely and have laser-like focus on generating credit to fund commercial and infrastructure loans. Because there is no need to provide costly retail banking services, an already crowded market in many areas of the country, public banks can be the engine for a state or city’s economic development program by providing affordable loans. Anyone who supports a good idea like renewable energy, worker-owned cooperatives, or effective public transit systems knows that very often the roadblock for each is always the same — lack of money. Without taxpayer funding many of these ideas die or the implementation gets postponed. But with low cost credit, available through a public bank, many of these good ideas can get funded. A credit union does not have the lending capacity of a public bank to fund these kind of loans, many of which run into the hundreds of millions of dollars.

There are other differences. Public banks are owned by government entities, while credit unions are owned by their members, who are the depositors, and with whom credit unions work collaboratively to share resources for convenience and savings. CU Service Centers and the CO-op ATM Network are two examples of this cooperation, something that a public bank as we normally conceive it would not consider (although new forms of public banking are always possible).

Both government-owned public banks and cooperatively-owned credit unions are ways to create more democratic approaches to banking. While their differences are significant, they both move in the same general direction, returning banking to our communities and sharing in the many benefits that come from localized control of banking.

Marc Armstrong is the president of Commonomics USA and co-founded the Public Banking Institute.

What We’re Doing in Laramie

by Matt Stannard

Members of the Laramie Ecovillage Group, myself included, are in the process of creating an intentional, ecologically sustainable, income-sharing community near Laramie, Wyoming. If you share our values (cooperative culture, non-hierarchical economic communalism, deliberative democracy, commitment to personal and spiritual growth), you might consider reaching out to us and join us in committing our lives to a world beyond capitalism.

We consider our effort to be revolutionary in scope. All of us in the group are, in ways both different and similar, economic refugees. All of us are committed to both reducing the adverse impact humans have on the environment, and practicing a personal, radically intimate (while deeply respectful of personal security and space) localized socialism that we believe is conducive to a widespread transformation of economic and political systems. We share the belief that personal and social change ought to be complimentary, and reject the idea that we must choose between mass political change and local community building as “first priorities.”

We are committed to income-sharing because economic insecurity has killed those we love and has whittled away at our own lives. Our community will share in both debits and rewards, and we will practice carefully-planned scaling of costs and community enterprises to take advantage of the basic principles of economic cooperation. We are already forming one cooperative business enterprise and will facilitate more, aided by the plentitude of information about cooperative management from a variety of values-compatible sources.

Presently, we are exploring many land acquisition options, from community land trusts to cooperative or private purchase. We are looking at several pieces of land and have so far received one offer from a seller. Our group includes legal professionals and experienced intentional community consultants–and several people who have previously lived in intentional communities.

Next weekend, we are hosting a retreat, with around ten guests coming from outside of Laramie, for people interested enough in this project to spend the weekend with us discussing cooperative culture and economics, income-sharing, ecological sustainable community, and how people live communally.

If, in the course of reading this, you have found yourself feeling that this is something you’d like to do, if it has spoken to your deep sense that a community like this is possible, necessary, and a place where you would thrive, you should get in touch with us. Joining would follow a careful and conscientious process and a mutual decision between you and the community. You would need to be committed to becoming a better, more cooperative person always, and doing what you are capable of doing to contribute. It’s definitely not for everyone, but it could very well be for you.

What we’re doing isn’t unique. There are thousands of intentional communities, including many income-sharing communities. But we know what we’re doing will make a difference for our membership, and we hope it will help shape a world that desperately needs this kind of re-shaping.

Matt Stannard is policy director at Commonomics USA and a founding member of the Laramie Ecovillage Group.