Reinventing Finance: From Wall Street to Main Street

A new report, How to Liberate America from Wall Street Rule, calls for a restructured banking system that is built on local financial institutions that are transparent, accountable, rooted in community, and dedicated to funding activities that build community wealth and meet community needs.

The proposed system would look quite similar to the one that existed in the United States before the wave of financial deregulation that began in the 1960s. The report, published by the the New Economy Working Group, briefly traces this history, outlines its devastating consequences, and presents an agenda for corrective action to change the system rules, structure, and culture.

The authors present a six-part agenda for ending Wall Street’s "disastrous experiment" and creating a community-based, publicly accountable money and banking system that is responsive to the needs and opportunities of the United States in the 21st century. The six actions are:

  1. Reverse the process of banking consolidation and build a national system of community-based, community-accountable financial institutions devoted to building community wealth. Break up the megabanks and implement tax and regulatory policies that favor appropriate-scale community financial institutions and, in particular, community financial institutions organized as cooperatives or owned by nonprofits devoted to community wealth building.
  2. Create a State Partnership Bank in each of the 50 states to serve as a depository for state financial assets. State banks can keep these funds circulating in state by partnering with community development financial institutions on loans to local home buyers and locally owned enterprises engaged in construction, agriculture, industry, and commerce.
  3. Restructure the Federal Reserve to limit its responsibility to managing the money supply, subject it to federal oversight and public accountability, and require that all newly created funds be applied to funding public infrastructure. Assign responsibility for the regulation of banks and so called “shadow banking” institutions to specialized regulatory agencies.
  4. Create a Federal Recovery and Reconstruction Bank to finance critical green infrastructure projects designated by Congress. It would be funded with the money that the Federal Reserve creates when it determines a need to expand the money supply. Rather than introducing that money into the economy through Wall Street banks, it would instead be introduced through the Federal Recovery and Reconstruction Bank.
  5. Rewrite international trade and investment rules to secure national ownership, self-reliance, and self-determination. Bring international rules into alignment with the foundational assumptions of trade theory that the ownership of productive assets belongs to citizens of the country in which they are located and that trade between nations is balanced. Hold corporations operating in multiple countries accountable for compliance with the laws of each country of operation.
  6. Implement appropriate regulatory and fiscal measures to secure the integrity of financial markets and the money/banking system. Such measures properly favor productive in- vestment and render financial speculation and other unproductive financial games illegal and unprofitable.

The report concludes: "Leadership in implementing the proposed agenda will depend on citizens acting in concert with their state and local governments to advance public understanding of the issues raised here, moving their business from Wall Street to Main Street financial institutions, promoting cooperative or nonprofit ownership of financial institutions, and advocating implementing legislation."

How to Liberate America from Wall Street Rule was produced in collaboration with the New Economy Network and is an outcome of a series of conversations focused on building a policy agenda for transforming our money system. David Korten is the lead author, and participating organizations include Business Alliance for Local Living Economies, Capital Institute, Democracy Collaborative, Green America, Institute for Policy Studies, Living Economies Forum, New Economy Network, New Rules Project, Institute for Local Self-Reliance, Public Banking Institute, RSF Social Finance, and YES! Magazine.

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