The Occupy Bank Is Coming
Carne Ross is the author of The Leaderless Revolution: How ordinary people will take power and change politics in the 21st century. As a senior UK diplomat, he stepped forward prior to the invasion of Iraq to testify that the basis for the coming war was false. Now based in New York City, he is working with other OWS members on planning and creating an Occupy Bank. The following is a transcript of his speech during the June 27th “Occupy the Citi” protest at the Citigroup Building in Long Island City. Carne’s presentation and the Q& A were recorded and livestreamed by Stopmotionsolo. The all-day protest was sponsored by Occupy Astoria LIC.
CARNE ROSS: The values of our movement are the values that will guide society and economy and indeed our politics from here on in. After all what we believe in, in the Occupy movement – values of transparency, democracy and justice – are fundamental human values, which I think are shared by people worldwide. And the extraordinary attention that Occupy has gathered both in this country and worldwide – we have here a journalist from Le Monde, a senior journalist from Le Monde, he’ll report on what you guys are up to – illustrate the fundamental appeal to what the Occupy movement is doing. But it is not just about human values. To me it is also about the very construction of the economy and the construction of society, and the ways how we as human beings manage our world.
It’s pretty clear to me that with the emerging severe crises of economic volatilities, which are just as evident today as they were in 2008; of climate change, where we just had the Rio-plus-20 meeting down in Brazil, which utterly failed to provide a decent solution to one of the world’s greatest problems; to mounting inequality, which threatens to rend our very societies at their core; things are in crisis, capitalism is in crisis, our democracy is in crisis. It has to change. It cannot go on as it is now.
And the things we are talking about in Occupy are in my view the only way that we can restore society, that we can restore the economy and indeed our politics, not just to something fair and democratic, but to something that will work, to something that is actually sustainable. And I think these ideas through the Occupy movement – but they’re also emerging elsewhere in the world – are starting to filter out. People are starting to get it. In Spain, in Britain, in Europe, even in the Far East, China, Japan, people are starting to get the message that the current model is not working and something better is emerging. And we are part of that vanguard. And it’s such a privilege to be here, to be part of the Occupy movement and part of that vanguard movement. We will remember this.
Anyway, to banking. Sounds sometimes rather boring but in some ways it’s fundamental. If you take an analysis of what happened in 2008 and the banking crisis, I think we all know what took place. I don’t think anyone needs reminding of the fundamentals of that situation. The banks engaged in reckless behavior, threw out huge losses, created immense risk, not only to the US economy but also the global economy. They had to be bailed out from everybody else, and the taxpayer to the unemployed but above all the poor are paying the price. Everyone is familiar with the fundamental contours of what happened.
But what is it about banking, the industry itself, that helped cause this? And what do we need to do about banking, these people, this institution? I hesitate, I stress institution rather than the people because I don’t think bankers are fundamentally evil or bad people, or any worse or any better than the rest of us. But the system in which they work forces them to take part in behaviors and activities which are fundamentally risky to the overall economy, and produce fundamental injustice.
Why is that? Banks are private, for-profit institutions. They are forced to compete with each other. One of the ways they must compete with each other is by creating new financial products that competitors do not have. If they do not innovate these new products they probably will fall behind other banks. Their stock prices will fall, they will be taken over by their competitors, they will cease to exist. The Darwininan logic of the modern economy works on banks as powerfully as it works on anyone else. And this is one of the factors that lay behind the 2008 banking crisis.
JP Morgan innovated the credit default swaps in response to a severe threat to its very existence. [JPM is widely credited with inventing the modern form of CDS instruments in 1994. – Ed.] The losses at JP Morgan made them worried that JP Morgan would be taken over. Their capitalization was falling relative to other banks. They were at severe risk of takeover if they did not innovate new kinds of products. And CDS’s were one of the consequences. A group of bankers went down for the weekend to Miami, and they dreamt up this financial instrument called the credit default swap, which was basically about slicing and dicing risk, selling it on to other purchasers, to spread risk. The idea was to reduce risk [...]
There’s nothing bad about it, they had no evil intent, or purpose, and yet they created this instrument, forced by competitive pressures, that helped contribute to this enormous crisis. [Because] CDS’s helped conceal risk, not spread it, to such an extent that the balance books of banks were obscure to their own bosses. This created a situation that when the pyramid started to topple, when the first domino in the row started to topple, with [the] Lehman Brothers [bankruptcy in September 2008], the rest of the system suddenly woke up to the fact that it was enormously exposed, massively over-exposed to risk. The federal government thought they had no choice but to bail out the banks, to save the whole economy.
What can we do about this? This problem seems utterly overwhelming to us. And indeed that’s often how I feel about it. It’s really hard to work out what’s going on. It’s hard to work out what actually happened. God knows it’s hard to figure out what we can actually do about it. And that’s the task we set ourselves at the Occupy Alternative Banking working group. That group has now become two groups. One is the Alternative Banking working group, taking the original name. And they’re pursuing lobbying on legislative reform, to try to reform the banking system to make proposals on things like the Volcker rule, the too big to fail rule, and the Dodd-Frank Act. But there’s another group, [...] the Occupy Bank group. This group believes that we cannot reform the current system of banking as it currently is. It is fundamentally implausible to reform the system.
Why is it implausible? Because you cannot reform the basic nature of our economy, you cannot reform the basic nature of our democracy, and the fact is, the facts of that democracy [are] clear every day when you see Jamie Dimon given access at the White House, access that the rest of us can never hope to have. [B]anks have [occupied] the political system in a fundamental way. They’re all over Congress, they’re all over the legislators, they’re all over the regulatory bodies. How can we possibly expect Washington or even our state governments to produce meaningful reforms?
It’s [just absurd.] The evidence is in front of us. Even after the terrible crisis of 2008, the gravest economic crisis the world has faced since the 1930s, in which many millions of people around the world are still paying the price and facing the consequences, we have legislation from Washington which in my view and others is entirely inadequate to manage the banking sector, to manage the enormous systemic risk we still have in our economy. The Dodd-Frank Act, a piece of legislation of 600 pages, produces a vast swath of legislative measures, requirements on banks, capital requirements, requirements on reporting, and on the face of it this looks like a pretty hefty piece of legislation to control the banking sector. But in my view and in the view of others more expert than me (and I never claimed to be an expert, I’m really an activist) it isn’t going to work.
And the reason it isn’t going to work is because it is based itself on fundamental distortions, it does not deal with the fundamental fact that banks have this political influence, but even beyond that public element. And we can see this already in the response of the banks to the so-called Basel rule. The Basel rule [was] recently agreed among the most powerful economic countries of the world to control banking globally, for instance by forcing them to have minimum capital requirements against their lending. Minimum amounts of good capital in the banks, against the risks that they’re taking through their lending. As soon as those requirements appeared, Jamie Dimon of JP Morgan and other senior bankers went from Washington to London to Frankfurt to Berlin, lobbying against those capital requirements, in every single country, using exactly the same argument. And it’s quite a plausible argument to a lot of them. That higher capital requirements will make banks less competitive and will make economies grow slower at this terrible time when we’re all in recession. It’s a very powerful political argument. This isn’t just that the banks are also donating to political parties. We all know it’s a good argument in its own right, higher capital requirements may well slow growth.
The measures that we need to put in place to protect ourselves against another banking crisis may indeed have a short term cost. There’s no doubt and according to independent analyses, the arguments of Jamie Dimon and others are overstated. The risk to global recovery of the Basel banking rules are probably neutral on balance, and indeed, bankers originated the Basel rules. The Bank of International Settlements [located in Basel – Ed.], which is like the central bank for central banks, judges that the arguments Jamie Dimon and others have made are indeed overstated. But the mere fact [is] that Jamie Dimon is able to make those arguments and have political influence. And indeed, in country after country, the Basel requirements have been watered down, one by one. Including in this country.
This illustrates the fact of the enormous influence of the banking lobby over these fundamental safeguards, not only to the banking industry but to us – our economy, our society, our country. So this is a pretty political problem to confront. What can we do? Can we make any difference that we go for? Would it make any difference, can we write to our Congress men and women with alternatives?
In my view it will make no difference, we actually have only one choice, which is we have to rebuild the banking system from the ground up. Make it fundamentally different from its current nature. By rebuilding the banking system from the ground up, we’ll send a message, like a bolt of electricity, to the whole economy. The banking system is after all the nervous system of the whole economy. By changing banking, we can change the economy, we can change society.
What do I mean by this extraordinary claim, this extraordinary ambition, this extraordinary thing that we’re trying to do in the Occupy Bank working group? In its basic characteristic, it’s very simple. It’s an Occupy Bank. What are the values of Occupy? What are the values that we aspire to for the movement? Democracy, number one, social justice, number two, transparency, number three. [...] Given the list of characteristics of a new kind of bank, of a new way of doing things. A bank that would be owned by its customers and staff.
A cooperative bank? A bank that will be democratic! It would be run according to the wishes of its owners. Not according to the wishes of shareholders, or the think-tanks, or the stockmarket [...] It will be run according to the wishes of the people who use the bank’s services, who are the people who actually own the bank. That will be us. The customers. What we’re trying to set up in the group is a bank where it merely takes one account – 50 cents, 10 cents – you will become an owner of the Occupy Bank. There’s some way [still to go] to setting this up, but it’s going to happen, mark my words.
The next thing, by being an owner, you will run the bank. We will set up a system that will mean that like in most cooperatives, like at Mondragon in Spain or [J____] in Britain, that the workers and the customers actually control how the bank is run – what kind of services it should offer, what kind of behaviors, what kind of policies it should offer as an institution.
Thirdly, it should be transparent. Clearly one of the contributing factors to the banking crisis of 2008 and one of the problems we have now is that banking is not transparent. Even bank CEOs like Vikram Pandit here in Citibank did not understand what was going on in their own banks. How is it possible for ordinary people, or for politicians (who are I suppose a different kind of ordinary people), to understand banking, if the CEOs themselves can’t understand it? There is one simple way around this, which is actually transparent banking operations. You show how the money goes in, and you show how the money goes out. You don’t compromise people’s personal finances, their personal confidentiality, but you run the bank transparently. There is no particular reason why you should not do that. There is no good reason why you should not be able to do that.
So you’ve got this bank that is transparent, democratic, owned by its members. And there is a fourth value which is particular to the banking sector. Which is, that as a matter of principle in the conduct of the bank, the bank would not engage in the reckless predatory practices of the current for-profit bank. Why, for instance, [do we have] reckless lending, derivatives trading, short trading – a classic example and activity with zero social value, which is causing considerable volatility, particularly in the prices of basic commodities, [and] which by no coincidence affects the poorest people in the world?
There would be a further principle, which again is very much a value of the Occupy movement. Which is that this bank will be accessible to everybody in society, and everybody in the economy – the underbanked, the unbanked, people who are denied services by these guys [points to Citigroup Building], the for-profit banks who see banking as a profit-making activity and not as a public service.
The fundamental idea of what we’re trying to do in the Occupy Bank working group is that banking is about a public good. The means of exchange is a public good. It should belong to us. It shouldn’t belong to private for-profit agencies. It is something so fundamental to our well-being as a society and as an economy that we need to reappropriate this much. We need to take back banking, we need to take back the very means of exchange, and take it back into our hands. The economy is ours. The economy is ours. Not theirs. It is us who work, who pay our taxes, who still have businesses, who have to make ends meet. It is not them [again pointing to building]. They have legitimate needs as employees and people too. But they are a tiny, tiny minority. And their requirements have formed an entity which is not relevant to the entire rest of our economy. It makes no sense.
Things have gone horribly out of proportion. And it takes a grave crisis, like in 2008, for us to see that. [... inaudible segment ...] [The authorities] will not admit it, but they do not have the power to regulate. Our only alternative is to start up something ourselves, from the bottom up. So I [...] with you, building at an atomic level through our own behaviors, through our own institutions, something that is ours [...] This is the only way forward for us and is in fact, also, the only way forward for our economy as a whole. And as I said, I hope that in setting up this bank we’re going to send a message to the economy as a whole, and foster this new type of economic development, this [...] fair, accessible to everybody throughout our economy. And those are our ambitions.
And we’ve had [a lot of tears?] and we’ve had our problems, and we’ve had our ups and downs, but [we've made progress] and we’re meeting tonight, and if any of you can make it, you’d be very welcome. The Alternative Banking group meet on Sunday afternoons up at Columbia University. I could get you in touch with either group, you just want to send me an e-mail. [Gives e-mail; see Carne's site.] And I’ll be glad to put you in touch with the facilitators [of either group].
We need your support. It matters a lot to me that we’re all out here today… Change is not easy. We all know that. We all know that one demonstration in Washington is not going to change things… fundamentally. We have to change the economy. This is one part of our movement is all about, what we’re trying to do in the banking group. So please join us, please support us. Thank you very much.
Q. I don’t know if there’s an answer to this, but if banks like Citibank are truly damaging and destroying neighborhoods, people who make these decisions, they live in neighborhoods, they live in society, that are affected by these very policies. Can you talk a little bit about that disconnect? They’re making things worse in a world they too live in.
A. Yes, it’s a terrible disconnect. [Pointing to building.] You see this glass-wall filled palace, utterly impenetrable. We can’t go in there and talk to them. We’ve got cops and security guards stopping us from doing that. It’s a real problem. And it dehumanizes them as much as anything. They’re human too. [Laughter.] And I really believe in dialogue. You know, I used to be in the government, I used to be part of the faceless bureaucracy… And at least I like to think of myself as not a bad person. But we never talk publicly about it. It’s one of the terrible things about modern democracies. They’re detached from the masses and we’re detached from them. Everybody’s detached from the work that we do. They’re in some different world, worrying about stock prices, worrying about profits. We’re all dehumanized by this, it’s a tragedy. [Describes strategy of making Occupy Bank successful "as a means of bringing people in."]
The other is to try to engage these people here. I talked to one of Jamie Dimon’s advisers about this. You know at first he just kind of laughed it off. Ha ha ha, Occupy, that was his reaction. [...] We’re not going to convince them as an institution. As institutions they are… inhumane and not in accordance with their own human interests. The only way to change that is to convince them one by one, you can. You can get people to change their own behavior in an institution even like this. You can convince them to leave, you can convince them to join us. But we have to provide a really, really powerful practical alternative. Believe me, having been in government, I’ve seen how easy it is for governments, let alone banks to ignore public pressure, to ignore… popular protest. I’ve become more sensible than I used to be. This is all very naïve to them but I think it gets through, I think some of those up there are looking down here, thinking, eh, what are they going to change? Nothing. Carrying on, look at those guys standing down there. Who’s listening to them? We’ve got to be more practical about providing, we ought to engage more, sending out credible stuff that to me is more plausible.
I do hope that fairly soon, in a matter of a couple of months, we will have a place for people to join the Occupy Bank. We are in talks about creating a rival monetary service… It wouldn’t be able to do all interbanking services, but it would provide all [individual] financial services.
Q. [...] Isn’t money in politics the root of our problems?
Money out of politics? I wish. I don’t think it’s workable. We’ve all seen what happened here. The system just struck it down, McCain-Feingold, it’s not working. And you know I come from Britain and from Europe, which is looked to by people in the US as an example of how to get money out of politics. But mark my words, it doesn’t work there either. It’s just more concealed. Money is in politics because money is power, and the more inequality grows in our society, the more powerful the 1 percent will be over the 99 percent.
I don’t know if you’ve been following events in Britain in the last few months, but there’s been these extraordinary inquiry into Rupert Murdoch’s activities and particularly how Rupert Murdoch has corrupted British politics of all colors. Every administration, every government, whether Labour or Conservative, for the last 30 years have been in the pocket of this man. Politics is corrupted by injustice, by inequality. As long as there are powerful people they will always get access that you and I cannot get. That is a fundamental… in representative democracy, where if you take a few making decisions for the many, they will be corrupted. The powerful always have their way of getting to them.
When I was in government, I worked on Iraq, I worked a lot on oil issues, I saw how BP, Shell and the others got to my senior officials like that [snaps fingers]. [...] That’s the way it works, it’s time to wake up to that reality. [...] We actually have to change decision-making structures to bring them down to our level. [...] You can’t legislate [out of this], you have to build new institutions which have equality at their heart. Which will not, because they have it as a fundamental principle, pay the bosses say more than five times what the lowest-paid employee makes. These are not implausible things. They happen [there are cooperatives out there], it can be done, but we have to set them up one by one.
Q. [...] So the nasty question you might hear from CNBC is, let’s say an Occupy Bank has been founded, and the depositors own it, and it invests locally, and it does not engage in derivatives and speculative inflation, it does all these other good things, what’s going to happen, the first time that one of these low-interest reasonable mortgages defaults anyway? And the first time that the Occupy Bank has to foreclose on a family?
A. That’s for the bank to decide. It’s not for me to prefigure that. One of the big debates we had at the beginning was should we set up a bells-and-whistles bank? You know a kind of build it and they will come idea. Or should we actually help people participate in deciding what kind of bank should this be from the beginning? And we actually chose the latter route, because the means are the ends. The way you build a bank determines how it is. I very strongly believe the decisions we make are our bank. And how do we treat people is a decision we need to make together as a bank. And I’m sure we’ll come to a solution. Very easy answer, yes. [Laughter.] Put it off down the road. [...]
It’s taken us a long time to learn about the system and we’re still grappling with it. It should take a while. We shouldn’t just set up a bank.
Note: The transcript has been edited lightly for readability and contains a few gaps and fill-ins because of wind interfering with the audio. These are marked in brackets. Several parts of the Q&A have been omitted. Editor: Nicholas Levis.