Nationalize The Banks! Script!
Hi, I’m Max Rivlin-Nadler. And this is the first episode of Nationalize This! a podcast about public ownership, democratic control, and the successes and failures of nationalization projects.
Here’s some biography to start us on our journey into the politics and history of nationalization, privatization, and the possible futures ahead— I’m a journalist who has covered housing, the criminal justice system, nitty gritty local politics, and immigration for a decade, for places like the Village Voice (RIP), Gawker (RIP), The New York Times (still living), and NPR (undead).
I grew up in New York City and what was “public,” was everywhere and inescapable. I went to a “public school,” I learned to read at a “public library,” I took “public transit.” I listened to, and now sometimes report for “public” radio.
But at some point, I began to realize that many things I thought were “public,” which I took to mean that people had the right to use and access them, like I did growing up, weren’t really very public at all. Public colleges were unaffordable to many, public hospitals still charged exorbitant amounts for care, and even public parks were often closed for private events for the groups that claimed to have actually paid to maintain the parks.
“Sorry, kids, U2 is playing Sheep’s Meadow and and it costs $80 bucks, not that you can afford to go or would you know, even like want to attend.”
So when did this happen? Why didn’t these government-run institutions have the money to actually make them accessible to the public? When did private companies play such a large role in the funding and administration of public goods? Had it always been this way?
Well, of course it hadn’t.
Let’s stay looking at New York City. It’s the mid-1970’s, and New York is dealing with the dual problems of a dwindling tax base, due to wealthy white families high-tailing it for the suburbs, and a sprawling social safety net built over the previous few decades that no longer had the tax base to support it. The city funded itself through loans from banks, banks that had previously been more than happy to float the city through harder times, but for some reason this time was different. Instead, the city’s lenders, the banks, began to make crushing austerity demands of the municipal government, in the form of drastic cuts to the funding of vital public functions like schools and firehouses. This is what we now call the city’s fiscal crisis, where it was reported at the time that the city was bankrupt. Instead, it was meeting for the first time a new, growing economic consensus that has been labeled, for better or worse, as “neoliberalism,” a belief that private interests could better handle vital portions of government and the social safety net.
And this, this is where the private really, really took hold in my hometown — the banks demanded cuts, the city, after a long fight, mostly agreed, and they both agreed that the “private sector” could help the city function more efficiently.
Since then, for all of my life, public-private partnerships have been the preferred method for economic development in the city, with the government footing much of the bill of capital expenditures and the private, in turn, reaping the profits from newly financialized industries. Things like healthcare, college tuition, and housing began to become astronomically expensive as the banking and real estate sector leeched more and more money away from low-income communities. Today, you end up with a deeply stratified city, where the very right to exist in that space has been nullified by the sheer fact that you can’t afford to live there.
But this hasn’t been just New York City, of course. This has played out across the world, with a lot of different results. In the past couple of years, however, independent researchers have settled on a general consensus that in most places, the privatization of vital sectors of the economy led directly to the immiseration of and resource theft from the vast majority of people.
Those resources are then placed in the hands of a very select few.
Who will now use that money to stave off the worst effects of climate change. But we’ll skip that part for now, because that’s almost too fucked up to think about.
For years and years, these economic decisions only went one direction — a government would sell off assets like natural resources, its trains, or its hospitals — in the hopes that the private sector would run them more efficiently and make or save the government a lot of money in the process. But the thing is, profits and savings had a funny way of eluding governments once they give away full control of an industry, especially when multi-national companies can just take those profits to a bank account in a different country, with much more relaxed taxation laws.
It’s all a long and very complicated history, as I’m proving with this introduction, and it’s taught in liberal arts colleges and grocery co-ops across the nation and felt and experienced almost exclusively by the poor who live with it everyday.
But not everyone has always agreed with privatization. It’s not like, one day, politicians suddenly realized that hey, maybe giving away our resources to the highest bidder wasn’t the best idea?
In fact, resistance to these ideas has always been there — but things really began to change in the late twentieth century. In South America especially, populist movements, picking up the pieces after decades of US-backed coups, began to take some of their country’s assets back. In Venezuela, in Bolivia, in Argentina, politicians successfully took back industries and resources that had been privatized, and began to redirect the profits from those industries to support their own people, and not foreign investment groups. Argentina re-nationalized its airline. Bolivia re-nationalized its oil. Venezuela, re-nationalized oil and cement companies along with other industries, and even tried to seize golf courses and redevelop them as low-income housing. But that ultimately failed, because toppling golf is going to take a global revolution, apparently.
In the United States, however, the pink tide that rolled over South America, and which has proven tough to roll back by newer, American-backed politicians in that region, took a long, long time to arrive. But, hey — it’s here — and it’s being called socialism. Or Social Democracy. Or, if you’re Bernie Sanders, —Hanging Around Long Enough Until New Deal Liberalism Comes Back Into Style.
This is not a podcast that’s going to get into the weeds of what counts as socialism or doesn’t. As a journalist, I’m less interested in examining ideological differences and more interested in looking at and speaking to the people working on these types of ideas. What I want to look at is the possibility and successes of nationalization projects in America and what it would mean from the very seat of global finance for the country to re-establish, or establish for the first time, democratic control over industries and resources that are currently enriching the already extremely wealthy. At the same time, millions of people are being left out of an allegedly “strong economy” and being consigned to a deeply unhealthy future as environmental and societal conditions worsen for poor Americans.
As ideas like the Green New Deal gain traction, which would require a fundamental restructuring of American industry, and which includes massive nationalization projects like Medicare For All, it’s important to have candid conversations about what public ownership will look like, what form it could take, and who is working to implement these plans when the next financial crisis arrives. Because like it or not, another crisis will happen at some point.
For my whole life, and this is mostly because I was raised in Jackson Heights, Queens, a high density, super-diverse, low-income area — which relied heavily on public transit, public schools, and public parks, I’ve innately believed that which is public should be good. Of course — that which is public is very often not good at all. Most prisons are public and workfare has made social services into a punitive and exhausting hellscape for many.
What this podcast aims for is to investigate what are the implications of a renewed interest in public ownership, especially for industries that are not under public oversight and control. Many of those industries are engaged in behavior that are recklessly endangering the future of our planet. What would it look like to reclaim them? These aren’t untrod paths — other countries have walked them before. And they’re not just scandinavian.
But the path is certainly going to be a real tough one for those trying to walk it. The call for endless privatization and austerity is literally coming from inside the house. But with proposals for massive nationalization projects now at the forefront of the Democratic presidential primaries, it’s time we had a candid conversation about a very possible future where public ownership begins to grow again.
So where do we start with all this? We start with the last crisis, which is still unfolding. We start in 2008. We start with the banks.
That was then-Fed Chief Ben Bernanke, speaking to congress about whether the government planned to nationalize the banks during the global financial crisis. The government didn’t plan on nationalizing the banks, that’s for sure, but it did pour a ton of money into them — in the years following the financial crisis, the government put $245 billion into financial institutions, according to the amazing Bailout Tracker tool made available by ProPublica, which I definitely recommend you check out for a mind-numbing bit of recent history. The government handed out $45 billion to the Bank of America, another $45 billion to Citigroup, which gave it a 36% ownership stake in the country’s third largest bank, and $25 billion each to JPMorganChase and Wells Fargo. It gave out an additional $10 billion to, among others, Goldman Sachs.
In exchange, the government had the banks agree to a series of internal reforms and promises, which would, in their minds, curb the excesses that led to the fall 2008 crash. Within a year, the vast majority of financial institutions had paid back their loans, and the government was even able to turn a tidy profit on the whole affair — it got $20 billion back from the largest financial institutions from stock dividends and other fees. Hey, it makes you think — maybe this whole banking thing is wildly profitable? Especially when you don’t have to spend money bailing out the banks in the first place.
In the lead-up to the financial crisis in 2008, America underwent a stunning consolidation in the banking industry, following deregulation that lifted restrictions, especially those on interstate banking. By 2006, six banks held assets equivalent to 55 percent of the country’s gross domestic product. That meant that a stunningly large amount of the country’s wealth was being held by financial behemoths who were able to throw their weight around in Washington, shredding regulations that would have kept them from being as profitable as possible. And when they all came crashing down — the government decided against simply taking over the now-insolvent banks, thereby ending the years of reckless and destructive management, but instead gave them a loan, a firm talking to, and a promise to never, ever do that again.
Within a year the banks were back on their feet. They’re now posting record profits, year after year and shelling out bonuses that could buy you at least several smaller yachts or one really big one. Honestly, their call. Guess it depends on how they’re feeling.
It was all a different story, of course, for the third of the country’s population that lives in poverty or near-poverty, which honestly if you’re near poverty, you’re probably just as well in it. According to a study of the recession by economists at the University of Minnesota, the University of Toronto and the University of Michigan, the average working-age adult in the bottom 10% of earners suffered loss of income two-and-a-half times larger than the richest 10%. Black households, which had been targeted by the sub-prime mortgages that helped lead to the financial crisis, saw their net worth plummet 43 percent from 2007 to 2013. Median black family wealth will hit zero by the middle of the century if trends continue.
Which is all to say — a lot of people were knocked down by the 2008 financial crisis. Banks were the first ones to get back up and get back to full speed. Within years, they were helping to shred the modest regulations that were placed on them, and back to opening fraudulent accounts on behalf of their customers, attaching fake car insurance plans to car loans, and hiding billions of dollars of losses from investors. All while the factors that contributed to the 2008 financial crisis begin to line up once again — weak regulation and a highly leveraged financial system that has become even more consolidated and interconnected. It’s not a question of if, but when.
So what if we took a different path this time? What if we went in a different direction, completely? Instead of handing banks a bag of cash and letting them keep the keys to wealth, what if the government took that money, repaid debts, and told those bankers to get lost? What would it look like? How would the recovery differ — for poor Americans and for wealthy ones?
When the next financial crisis hits, which could happen really any day, there are some thinkers and organizers right now working on plans to put an end to the cycle of recurring financial crashes that, in 2008, wiped away the wealth of so many low-and-middle-income people. They’re looking to nationalize the banks.
This isn’t unprecedented — following the 2008 crisis, Belgium nationalized its largest bank, Iceland took over all of its major commercial, investment, and savings banks, Portugal Ireland, Latvia, and The Netherlands also nationalized banks to some degree. Our good friend in the capitalist banking system, the United Kingdom, nationalized several banks and took ownership stake in several others. There’s a roadmap. Our southern neighbor Mexico has a long history with state-owned banks, and famously, the state of North Dakota does business as the Bank of North Dakota, which holds the state’s money. The bank was mostly unaffected by the credit crisis in 2008, and went on to invest its own money into infrastructure projects to spur growth to help residents dealing with the sagging economy. There are a lot of paths forward, to say the least.
To that end, my guest today, my first guest ever, is Thomas M. Hanna, the author of “The Crisis Next Time,” a report released the Democracy Collaborative last summer. The Democracy Collaborative, which is also the name of a free jazz quartet, I believe, is a national research institute based in Washington, D.C. dedicated to developing new strategies for a more democratic economy. Thomas, welcome to the show. You’re the first one here. Congrats.