Making the case for a national public option

Payday loans

Photo by Tony Webster


Meagan Day in Jacobin makes a case for a state-owned bank, echoing two economic professors, Thomas Herndon and Mark Paul, who call for a national public banking option in Project Syndicate. Both articles are full of important historical perspectives and current statistics.

Day writes:

There are nearly twice as many payday lenders as there are McDonald’s locations in the United States. …”

Herndon and Paul, who wrote a recent Roosevelt Institute report, write:

“[T]he federal government should create a public bank to offer basic financial services to households, including deposit and transaction services, small loans, automobile financing, and mortgages. To ensure banking access in every ZIP code, the new public bank could form a partnership with the USPS, which already maintains office branches across the country. And because 59% of post office branches are located in ZIP codes with one or no bank branches, this would go a long way toward addressing the impact of bank branch closures.”

Day continues:

“Payday lenders rake in $46 billion a year. The business model is predicated on hidden fees, punitive fines and exorbitant interest rates — up to 700 percent in some cases. These high-risk loans often precipitate financial disaster, but people who are cash-strapped take them anyway, because they have no other option. Without them, they won’t be able to pay rent and may risk eviction, or they won’t be able to afford transportation or childcare and may lose their job.”

Herndon and Paul continue:

“We also propose that the government manage an online financial-services marketplace, where private services would compete directly with public services. This, too, would give the government significant leverage to prevent financial exclusion and consumer-protection abuses.”

[Read the full Day article]

[Read the full Herndon and Paul article]

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