In the News

For many Americans with limited or no experience with bank accounts, navigating the fees and policies that would make them account holders can be intimidating. And many small business owners seeking loans just can’t meet the standards set by traditional banks.

While many retail banks have worked to demystify procedures and lower fees, advocates for state- or city-run banks say they can do it better by putting the public good ahead of profits.

When the coronavirus first posed a threat to Americans’ health and finances, Tiffany Moore of Forest Park went to an installment lender for the first time in hopes of some financial relief.

The good news: she got approved for a $9,500 loan to make up for a tenant at her property who couldn’t make rent. The bad news: An interest rate of 35.989%.

It was easy to sign onto a contract that brought temporary relief. But realizing that she would end up paying more than twice what she borrowed, Moore paid the loan off early.

Q&A with Sarah Manning: Sarah Manning is a coordinator of outreach and public partnerships for the Alliance for Local Economic Prosperity (AFLEP), a nonprofit organization that educates and advocates for improving economic prosperity in New Mexico. The organization prepared a bill last regular session to establish a public bank and is ready with a new version for introduction during the 30-day legislative session that begins in January.

Payday loans are an example of small-dollar loans. These loans offer financing to predominately low-income communities. Borrowers must prove that they have regular paychecks and give lenders access to their bank accounts for direct withdrawals. Although these are short-term loans, lenders will “roll over” the loans for a fee if the borrower struggles with repayment. These fees typically exceed the cost of the original loan.

A borrower with a $300 loan could, for example, pay $50 every two weeks to roll over the loan and avoid default. After a year, the borrower could ultimately owe $1,300 of interest on a $300 dollar loan.

This is the situation we face in the United States. Currently, private banks create all the money in circulation — except for the bills and coins issued by the Treasury — by making loans. The Federal Reserve is a network of private banks with a special relationship to the Treasury. Interest on our growing federal deficit is paid to banks that hold Treasury notes. When banks become “too big to fail,” it is our tax dollars that bail them out. It’s clear that we have to address control of the money supply in order to solve a host of social, equity and climate issues. Yet, where can we get the leverage to make such a massive transformation?

Just in time for the UN’s policy push for “30 x 30” – 30% of the earth to be “conserved” by 2030 – a new Wall Street asset class puts up for sale the processes underpinning all life.