A former top Federal Reserve policy adviser, and the president of the Federal Reserve Bank of Minneapolis, have stunned the banking world by calling for public banks and the breakup of big banks.
Andrew Levin is surely one of the most (formerly) high-ranking monetary policy advisors to call for publicly-owned banks, in this case calling for the Fed's 12 regional outposts to be made government entities rather than privately-owned banks. At the beginning of this week, he called "for the Fed's 12 regional outposts to be made government entities, rather than owned, as they have been since their inception more than a century ago, by the banks they regulate."
And Minneapolis Fed President Neel Kashkari used to be the "bailout czar" in Washington, "charged with overseeing the Troubled Asset Relief Program during the financial crisis," according to Jordan Weissmann, senior business and economics correspondent for Slate. In other words, Kashkari helped design TARP and other programs to save the big banks he now wants to break up.
Consciousness of banking as a public utility seems to underlie not only the two gentlemen's policy ideas, but the media as well. The Reuters reporters who wrote on Levin's call for public regional fed banks pointed out in their piece that "the U.S. central bank is the world's only major central bank that is not fully public."And actually, Kashkari's call for "turning large banks into public utilities by forcing them to hold so much capital that they virtually can’t fail" is an offhanded call for banking in the public interest.
And beyond just calling for publicly-owned regional banks, it's pretty significant that Andrew Levin released his recommendations through Fed Up--a grassroots organization dedicated to radical changes in the Federal Reserve. High-ranking officials, and even consultants, hooking up with real economic justice groups seems to be the spirit of the times.
Both Kashkari and Levin are rebutting Federal Reserve chair Janet Yellen's stock arguments that "regulators already have the tools they need," and, of course, Yellen is nowhere near the concept that banks ought to be publicly owned--even some banks, even really important ones. Levin has a history of harping on Yellen, telling her last September not to raise interest rates.
As Weissmann concludes: "We now have a former politician with establishment credentials who has ascended to a somewhat influential position within the Federal Reserve basically running a campaign to chop banks down to size—or at least make them dull, safe, and certainly less profitable."
Kashkari is soliciting public opinion, by the way.
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