Alumnus Writer

The United States remains trapped in a slow moving social catastrophe. Millions of unemployed, late-middle-aged Americans will never again have full-time, well- paying jobs. Millions of the nation’s college-educated young are unemployed or underemployed and saddled with debt. The number of children whose diet depends on food stamps is soaring. The nation’s infrastructure continues its descent to Third World status, as public education crumbles with it.

Political power flows from wealth. When wealth is concentrated, so is political power.

Wealth and political power in the United States are now so grotesquely concentrated as to threaten democracy itself.

An apartheid America is emerging. The wealthy few, served by a second tier of retainers (presidents, members of Congress, corporate media, etc) who facilitate the expropriation of what once was the greatest and most broadly shared prosperity the world had ever known, becoming more and more wealthy as millions are reduced to poverty.

What can be done to arrest this staggering decline? Stop looking to Washington.

Sorry, MoveOn, Move to Amend, and all the many worthy advocates of a new and improved Washington; the federal government is bought.

The few who are not are marginalized and overwhelmed by the bought, who cloak themselves in ideology to disguise their willing service to the paymasters of a further concentration of wealth and power. They need to look to Main Street.The most striking characteristic of the American people has been, and remains to be, its diversity, and the magnitude of that diversity. There is nothing to match it. The modern United Kingdom, for example, is arguably as racially, ethnically, and culturally diverse as the U.S. But it has a population of only 62 million. The U.S. population is five times that and occupies a landmass 40 times greater than the U.K., making it infinitely richer in the diversity of its resources.

If it can be enabled, that diversity will fire up the engine of American ingenuity and enterprise, but Washington will not light that fire. Think of Washington as the apex of a pyramid. Pyramids are stable, but they are also tombs. Washington—the federal establishment —is a tomb where politicians sing songs of praise to diversity as they bury it.

The place to enable and harness the diversity of America is in its cities, counties, and states. The key to the entire enterprise is banking.

American banking today is as concentrated and dysfunctional as Washington. Nine banks now hold 75 percent of all assets in the U.S. banking system. The finance industry now accounts for more than 60 percent of all U.S. domestic profits. Yet, the system fails in its most important function: the effective allocation of capital and credit into the productive economy.

The trillions of dollars pumped into the failed and bailed-out banks never got past Wall Street.

They were never intended to. They sit instead in the banks’ reserve accounts with the Federal Reserve to prop up balance sheets that are more fiction than fact. The six largest Wall Street firms have a reported 14,200 subsidiaries.

A recent study by the Kansas City Federal Reserve calculated it would require 70,000 additional examiners to give those banks the same level of scrutiny to which the smaller community banks are subject.

Those would be the 7,000 plus banks that did not fail, needed no bail-out, and provide over 50 percent of all loans to the small businesses and entrepreneurs that historically have been the creators of new jobs in the U.S.

The U.S. banking system urgently needs an overhaul, and it is underway: the creation of a network of state, county, and municipal “public” banks, modeled on the hugely successful Bank of North Dakota (BND).

Public banks, often referred to as “partnership” banks, are capitalized with public funds and assets. These are then leveraged, as with any bank, to provide affordable and sustainable credit, which is distributed into the productive economy in partnership with private, community banks.

Public banks are not retail banks (the BND has one office). They are run by professionals, paid as civil servants, and receive no mega salaries, bonuses, or commissions as incentive to create the kind of runaway risk-taking which crashed Wall Street. Profits are reinvested in the loan portfolio or returned as non-tax revenue to the general fund of the jurisdiction that established the bank.

The BND has a current commercial loan portfolio of more than $2.9 billion and has returned an average of $30 million a year over the past decade to North Dakota taxpayers  —  in a state with a population of about 670,000.

Public banks eliminate the need for unproductive government “rainy day” funds, can provide disaster relief and low-cost student loans, and substantially reduce debt service on municipal bonds and infrastructure projects. They do this by bidding down interest rates or, when the bank buys bonds, returning the interest paid by taxpayers to the taxpayers’ bank.

Public banks work counter-cyclically in the economy, maintaining credit flows during economic downturns, as has been amply demonstrated both in North Dakota and nations whose economies were sustained by their public banks through the recession that devastated the U.S.

Finally, public banks can serve as the depository institutions for public funds and revenues, bringing billions of dollars back from Wall Street to Main Street, and begin to break the stranglehold the bankers have on the wealth of America. You can learn about public banking at

Mike Krauss ’71 is a director of the Public Banking Institute and chair of the Pennsylvania Project. He was one of three panelists of, “Building the New Economy,” held at 7 p.m. in the Bonchek Lecture Hall on March 26.

Questions? Email Mike at