In the News

Across the United States, states and municipal governments struggle to provide essential public services, such as schools, public safety, courts and prisons, public health, transportation infrastructure and parks, while also trying to keep taxes down for a middle class burdened with taxes of every kind. Some of those taxes are easily identified, like those on income, wages, property, sales and gas. Some are almost invisible. One of these is the tax on the money raised by the bonds that governments issue to pay for capital projects. It’s called interest, and this tax shows up in our public budgets and financial reports as “debt service,” which adds to the burden on taxpayers.

WASHINGTON — Neel Kashkari shocked much of the financial world Tuesday by saying the Dodd-Frank Act was insufficient and that breaking up the big banks and turning them into public utilities may be the only way to end “too big to fail.”
In his first public speech as president of the Federal Reserve Bank of Minneapolis, he said Congress and regulators need to consider a more radical approach to preventing future bailouts. His message was unusual enough because it came from a sitting head of a Fed regional bank, but it was all the more powerful because Kashkari is a former Goldman Sachs executive and chief architect of the Treasury Department’s 2008 bailout program.
“While significant progress has been made to strengthen our financial system, I believe the [Dodd-Frank] Act did not go far enough,” Kashkari said. “I believe the biggest banks are still too big to fail and continue to pose a significant, ongoing risk to our economy.”
Kashkari credited Dodd-Frank with increasing capital requirements on banks and said that has reduced systemic risk. But he said some other key reforms, including resolution plans known as “living wills,” are proceeding at a glacial pace and it is unclear if regulators would even use their new tools if they faced a future crisis.

In recent weeks, the City of Santa Fe released its public banking feasibility study which showed the city could save millions if it created a local public bank and the City of Philadelphia’s City Council unanimously voted to begin public hearings on creation of a local public bank. Cities, counties and states around the country are looking at public banking as a way to get out from under exorbitant Wall Street fees. Wall Street financing fees can double the cost of infrastructure projects. Why not self-finance infrastructure projects and save millions?