PUBLIC BANKING INSTITUTE NEWS: MAR 19, 2020
How Germany’s public bank will keep the economy afloat during the coronavirus outbreak
In a March 13th press conference, Germany’s Finance Minister Olaf Scholz demonstrated the power of public banks in times of crisis. He promised German companies that KfW, the country’s public bank network, would provide all the credit they need during this ongoing pandemic. The Daily Mail quoted Scholz:
“There is no upper limit to the credit offered by KfW, that’s the most important message. … If [the pandemic] lasts longer, we can go on longer. You can be courageous, the risks will be carried by us.”
Minister of Economics and Energy Peter Altmaier added:
“Some €550 billion ($604 billion) in government-backed loans is just for starters. We promised that we will not fail because of a lack of money and political will. This means that no healthy company, no job should find themselves in trouble.”
Businesses in Germany can immediately access loans up to €500,000, made available through their local banks or Sparkassen. The loans are being made available at an interest rate as low as 1%, with interest only for the first two years.
In contrast, the U.S. aid plan announced by President Trump authorizes the SBA to offer loans to businesses only after a lengthy process of designation by state authorities. The interest rate will be 3.75%, a whopping 1.75% above the KfW rate.
[read more]Fed drops interest rates to zero, eliminates reserve requirements, and triggers a market free fall
The Federal Reserve fired its last bullets to shore up the markets this past Sunday, March 15. Fed Chair Jerome Powell announced that the Fed had dropped its federal funds rate to zero, would be doing $700 billion in asset purchases (quantitative easing), and was eliminating reserve requirements for thousands of depository institutions. Historically, banks are required to keep 10% of their deposits in reserve.
Pam Martens and Russ Martens reported in Wall Street on Parade:
“One brave reporter on the Fed’s press conference…, which was held by telephone, asked exactly how eliminating reserves was going to help businesses and consumers. Howard Schneider of Reuters [asked], … ‘Did you get explicit agreements from [the banks] that this will go to customer finance and not something else?’ Powell made it clear that the Fed had not gotten any contractual guarantees from the banks.”
[read more]
Ellen Brown: The Fed’s baffling response to the coronavirus explained
PBI Chair Ellen Brown explains in Truthdig why the Fed’s monetary policies aren’t working and what our central bank should do instead:
“The central bank has become the only game in town, and its hammer keeps missing the nail. A recession caused by a massive disruption in supply chains cannot be fixed through central-bank monetary easing alone. Monetary policy is a tool designed to deal with demand — the amount of money competing for goods and services, driving prices up. To fix a supply-side problem, monetary policy needs to be combined with fiscal policy, which means Congress and the Fed need to work together. There are successful contemporary models for this, and the best are in China and Japan.”
[read more]Philadelphia Inquirer Op-Ed: Doing a Philadelphia public bank right
As Philadelphia comes closer to completing its public bank study, the Philadelphia Inquirer publishes an op-ed by Mike Krauss, Chair of the Pennsylvania Project and one of PBI’s co-founders, that highlights a path forward for the City’s public bank based on the successful model provided by the Bank of North Dakota. Krauss writes:
“The BND is not a commercial bank and does not compete with community banks and credit unions. It partners with them in lending to lower the cost of credit to their customers – small and large businesses, home buyers and students among them – and by providing those partner banks with cost saving banking services. By lowering the cost of credit and monthly payments, more borrowers can qualify for loans. Existing businesses can expand and new ones can start up. This means jobs. More residents can purchase homes and renovate them, to reduce neighborhood blight.”
[read the full article]Latest podcast features grassroots leaders West Virginia gubernatorial candidate Steve Smith and Washington State Senator Bob Hasegawa
In the latest It’s Our Money podcast, PBI Chair Ellen Brown and Walt McRee talk with West Virginia’s Steve Smith about the grassroots movement propelling his campaign, and with PBI Advisory Board member Sen. Bob Hasegawa on the encouraging progress on his Washington State public bank bill.
Grassroots Government Must Lead
Government “of, by and for the people” is a precept adopted by citizens and politicians alike, even though it may just be wishful thinking in terms of public policy. As the political money power of corporations continues to roll over public interest policies and practices, significant new public remonstrance is growing on many fronts. One of them is West Virginia, home to generations of exploitation by out-of-state monopoly powers, where one of the most exciting grassroots uprisings in the nation has deployed a powerful campaign for creating transformational public policy through democratic action. Its economic platform proposes a new public state bank. We talk with the champion of this campaign who is running for governor, Steve Smith, who currently leads in the polls. And we visit with another populist leader, WA State Senator Bob Hasegawa, that state’s most stalwart proponent of a state bank; he considers it essential for the State’s economy and future. Now it looks like he’s going to find success in his 10-year pursuit after all.
[listen to the podcast]Video Spotlight: Richard Wolff says don’t blame coronavirus for the stock market crash
Professor Richard Wolff, another PBI Advisory Board member, tells Greg Wilpert of The Real News Network on March 12 that our inherently unstable capitalist system has been overdue for a recession and that the coronavirus was just the pin that broke the stock market bubble.
“The actions of the Federal Reserve last week … not only didn’t stop the contagion and the trouble on the stock market, it actually frightened people. To see that kind of a stark action, it was a sign that the problems are probably more severe than we have been led to expect. … I don’t believe the virus by itself explains anything. And I’m deeply suspicious that blaming the cause of the event on the virus is a very convenient way to avoid putting the blame on an economic system that is apparently so fragile. I’m much more persuaded that the inherent instability of capitalism … is looking for something to deflate the overpriced stocks.”
[watch the video]