As anyone who has read the papers or seen the news in the last few years knows, banks around the world have broken numerous serious laws, have had to be bailed out with taxpayers money, and yet still pay millions of dollars to inept executives and billions more to stockholders. Many of their problems involve their connection to complex financial transactions that do nothing but make money for already-rich individuals. There has to be a better way, and there is. The economic melydown created by the covid-19 crisis seems a perfect time to reorganize the sector.
I would oblige all banks to become credit unions and I would strictly limit their functionality.
Credit unions are not-for-profit institutions cooperatively owned by their members. They operate solely for the benefit of their members rather than for outside shareholders, of whom there would be none. Their senior management is elected by the members and their policies are offered up for approval at regular meetings of the membership. Senior management remuneration would require members’ approval. The billions of dollars that are currently paid out in dividends to outsiders would be used to increase services and lower costs for the members. Any surplus could be re-paid to the members or added to the credit union’s capital.
I would limit their functionality to the taking, managing and disbursement of members’ deposits, and to the issuance of personal loans (including credit cards) and personal mortgages. Any member or corporation that required business loans, corporate mortgages, investments or insurance would turn to investment companies, mortgage brokers and insurance companies designed specifically for that function.
No one would be limited in their desire to engage in stock market or other investments. But these would be handled entirely by companies separate from banks. No longer would bank depositors’ cash be at risk in the marketplace for derivatives, for example.
Competition between credit unions, if such were needed, would become a function of service and accessibility. I believe this would get us more branches on the streets and a more personalized service between member and bank. It would bring banking back to the people, to a smaller scale that we can understand and control — after all, it is our money they are using.