In this episode of the Lean to the Left Podcast, host Bob Gatty interviews Gerald Epstein, author of 'Busting the Bankers Club,' and a professor of economics at the University of Massachusetts Amherst.

Epstein discusses how powerful interests within the 'Bankers Club,' including big banks like JP Morgan and Bank of America, federal institutions like the Federal Reserve, financial regulators, and others, have maintained a financial system that benefits the wealthy at the expense of the majority.

He explores the dualities of the financial system, its manipulation by powerful interests, the adverse impact of current banking practices on the average person, and the potential for reform.

Epstein argues for the break-up of the Bankers Club to create a more equitable and functional financial system that serves broader societal needs, including those of marginalized communities and the push for a greener economy.

He also addresses the challenges of making such transformations and highlights the efforts of activists, public officials, and reform-minded groups working towards these goals.

The conversation delves into specifics such as the destructive influence of credit card interest rates, the legacy of economic policies that have exacerbated racial inequalities, and the potential for public banks to fulfill social missions.

Epstein emphasizes the importance of democratizing financial institutions, like the Federal Reserve, and the need for wide-ranging reforms to address issues of inequality and to harness finance as a force for good in society.

He calls for passage of federal legislation to create public banks that serve marginalized communities, communities of color, small businesses, and funds "green" environmental initiatives.

00:00 Introduction: The Cycle of Bank Bailouts

01:48 Unveiling the Bankers Club: Allies and Operations

04:56 The Dual Faces of Finance: Necessity and Destructiveness

11:03 The Federal Reserve's Role and Influence

20:25 Addressing Inequality and the Power of Public Banks

24:17 Racial Inequality and Financial Systems

27:16 The Fight for Financial Reform and Public Banks

33:06 The Political Landscape and Economic Implications

39:30 Concluding Thoughts and Where to Find the Book 

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Show Notes

Breaking the Cycle: Confronting the Bankers Club with Gerald Epstein


This episode of the Lean to the Left Podcast features an in-depth conversation with economist Gerald Epstein, author of 'Busting the Bankers Club', exploring the influence of the 'Bankers Club'—a coalition of big bankers, federal reserve officials, regulators, and other powerful allies in maintaining and leveraging economic power to their advantage. Epstein discusses the need for meaningful financial system reform, which includes breaking up this alliance to make finance serve the broader public and support a transition to a greener, fairer economy. 

He highlights historical contexts, such as the 2007 and 2020 economic crises, the dual nature of finance, and the pressing issue of escalating CEO pay in contrast to the average worker, emphasizing the impact of financial inequality on racial disparities and the need for public banking initiatives. 

The conversation also touches on potential solutions to reform and democratize the Federal Reserve, address systemic financial issues, and the counterproductive nature of current inflation-fighting strategies. Epstein encourages involvement in club-buster activities and the broader political process to initiate substantial changes in the financial system.

00:00 Introduction: The Cycle of Bank Bailouts

01:48 Unveiling the Bankers Club: Allies in Power and Wealth

04:56 The Dual Faces of Finance: Navigating the Jekyll and Hyde

11:03 The Federal Reserve's Role: Chairman of the Bankers Club

18:56 Challenging the Status Quo: The Fight for Financial Reform

24:17 Addressing Racial and Economic Inequality Through Banking Reform

27:31 Envisioning a Future: Public Banks and Federal Initiatives

33:06 The Political Landscape and the Path Forward

39:30 Conclusion and Where to Find the Book


Show Transcript

Gerald Epstein: Solutions for a Fair Economy

[00:00:00] Bob Gatty: Bankers brought the global economic system to its knees in 2007 and nearly did the same in 2020. Both times, the U. S. government bailed out the banks and left them in control. Now, how can we end this cycle of trillion dollar bailouts and make finance work for the rest of us? That's our focus today with economist Gerald Epstein, author of Busting the Bankers Club, which confronts the powerful people and institutions that benefit from our broken financial system. So stay with us. 

[00:00:36] Drawing from decades of research on the history Economics and politics of banking. Epstein shows that meaningful reform will require breaking up this club of politicians, economists, lawyers, and CEOs who sustain the status quo.

[00:00:55] Thankfully, thousands of activists, experts, and public officials are working to do that. Busting the Bankers Club. Centers the individuals and groups fighting for a financial system that will better serve the needs of the marginalized and support important transitions to a greener, fairer economy.

[00:01:19] Epstein is professor of economics and a founding co director of the Political Economy Research Institute at the University of Massachusetts Amherst, he's the author of the Political Economy of Central Banking Contested Control and the Power of Finance.

[00:01:39] Thanks for being with us today on the Lean to the Left Podcast, 

[00:01:43] Mr. Epstein. 

[00:01:44] Gerald Epstein: Thanks so much for having me. It's a pleasure to be here. 

[00:01:47] Bob Gatty: Thank you. Now, exactly what is the Bankers Club that you write about? 

[00:01:52] Gerald Epstein: The Bankers Club is a set of allies that the bankers cultivate to protect them and to support them in their attempts to gain more power and more wealth in our economy.

[00:02:03] The bankers need the Bankers Club because banks are very unpopular in America. Poll after poll shows that Americans don't really have much faith in the banks. They don't like the big banks, especially and so they need allies to protect them in Congress to push for legislation that helps them to protect them in the courts and so forth.

[00:02:22] So who are the members of the bankers club? Course the bankers themselves, and I'm talking mostly about the big bankers like JP Morgan, bank of America, et cetera. But it's not just them. It's the federal reserve system. I call the federal reserve system, the chairman of the club.

[00:02:37] They're the most powerful financial institution in our economy. And by and large, they support the banks. In addition, it's the regulators, many of the financial regulators. Like the Office of Control of the Currency, the Securities and Exchange Commission, et cetera. Typically, though not always, support the banks help them make loopholes in regulations and so forth to enhance their profits.

[00:03:01] Then there are the lawyers who help do this with the regulatory agencies and elsewhere and work for the banks. And even some non financial corporations like General Electric and U. S. Steel and so forth. More and more are siding with the banks through organizations like the Chamber of Commerce and so forth.

[00:03:20] And finally, even members of my own profession, the economists, some of them are big allies and supporters of the banks. And this whole group, which I call the Bankers Club, is really the group that sustains the power and wealth of the banks. And in order to change our financial system, we have to break up or bust up this Bankers Club.

[00:03:41] Bob Gatty: Okay, so what's their goal and objective? 

[00:03:46] Gerald Epstein: The first thing, of course for the mega banks is to increase their profits, their wealth. And the way to do that, in their view, Is to minimize government interference with their operations and better yet even to subsidize their operations.

[00:04:03] We can see the subsidies in all kinds of ways. The big banks, they have access to easy liquidity and emergency lending from the federal reserve. When the big banks get in trouble, like they did during the great financial crisis the federal reserve and the treasury typically comes in and bails them out.

[00:04:22] They also seek support from the Treasury Department, the Federal Reserve in their attempts to influence global financial regulations and global geopolitical treaties and so forth to help them get more business in Latin America or in China or elsewhere. What they want is more power, more wealth and that's what they want the bankers club to help them out with 

[00:04:45] Bob Gatty: so it's all about money Just like everything else 

[00:04:49] Gerald Epstein: Money is at the root of it for sure. And certainly in a capitalist system. It's really at the root of so much 

[00:04:55] Bob Gatty: Yeah, for sure. Now in your first, in your very first chapter of the Bankers Club, you say that the positive face of finance is crucial to the well being of a modern capitalist economy like ours, but all too often the destructive face of banking and financial markets takes over.

[00:05:14] What do you mean by that? 

[00:05:16] Gerald Epstein: Yeah, so in the first chapter I call it the Jekyll and Hyde of finance. 

[00:05:19] Bob Gatty: Right. 

[00:05:21] Gerald Epstein: I look back at the old Robert Louis Stevenson story about Jekyll and Hyde. There was Mr. Jekyll, who is an upstanding member of the community, a doctor very well respected who had this strange relationship with Mr. Hyde, who was a murderous scumbag, to put it mildly. And, 

[00:05:40] Bob Gatty: Like some of the bankers. Sorry. 

[00:05:43] Gerald Epstein: And somebody was looking into these murders that, that Mr. Hyde had made and trying to figure out who had done it. And finally, in the end, discovers That Jekyll and Hyde are the same person.

[00:05:54] It's the two faces of the same human being. And in a sense, our financial system is like that. On the one hand we need a Every economy needs a financial system of some kind. We need it to have some place to Park our savings and we need a system to make our, help us make our payments.

[00:06:15] We use checks, we use credit cards. We use money a financial system to get borrow to loan us money when we have long-term big investments we need to make for a house. To save for higher education or retirement and for businesses to borrow money to build plant and equipment and so forth. So a well functioning financial system really is important for any kind of economic system and especially a capitalist economic system.

[00:06:45] And the great thinkers of economics have all understood that. On the other hand, There's this other face of finance, the Mr. Hyde face of finance that we saw, for example, in 2007, 2008, with the crash of the economy that almost brought the world economy down. But we also see it in the daily operations of our big banks.

[00:07:05] They overcharge fees, the credit card companies overcharge for late fees they, charge an excessive amount for mortgages and so forth. So we see that it's not just that these mega banks and big financial institutions cause problems when they threaten to bring down the whole economy, but they don't serve us that well, very well on a daily basis.

[00:07:27] So that's the Mr. Hyde. Side of finance. 

[00:07:30] Bob Gatty: It's really amazing to me speaking of bank fees, the the interest rates that are now being charged on credit cards. I have a really high credit rating, , and I keep getting all these offers for credit cards, but the interest rates after the, after the initial period where they give you all these little goodies ends after that ends, incredible. 30 percent sometimes. Yeah. And that's just that's userous to me. 

[00:07:59] Gerald Epstein: That is userous. And they get away with it because it's a relatively concentrated market. The small, relatively small number of credit card companies and a relatively small number of banks that they're connected to.

[00:08:12] And that, these high rates, 30%, 40%, 50% Percent are usurists. What's even worse is the fact that marginalized people, poor people can't even get these kinds of banking services. They live in places with banking deserts. They have to go to check cashing firms or payday lenders, and they can be charged, hundreds of percent.

[00:08:35] So yes and in the, there used to be usury laws. 

[00:08:39] Bob Gatty: Yeah. There used to be. 

[00:08:41] Gerald Epstein: There used to be usury laws. And part of what has happened is the Bankers Club has been able to get rid of most, if not all of these usury laws. 

[00:08:49] Bob Gatty: Yeah. I was going to ask you what happened to them. So how can we bust up this club of these evil people and reform finance to make it work for everybody?

[00:08:58] Yeah. Absolutely. 

[00:08:58] Gerald Epstein: Yeah look, I just want to make a point about this. Are these evil people? Yes and no some of the things they do are definitely evil and I you know, can't look into their souls I don't know the soul Jamie Dimon's soul. I can't look at inside to see right so he has but it's a part of what the capitalist system promotes which is, greed is good We have Adam Smith's invisible hand, the you produce the baked goods, not from the the generosity of the baker, but from the self interest of the baker, and then it all through the invisible hand of the marketplace somehow gets transformed into something that's good for everybody.

[00:09:34] That's the free market laissez faire Milton Friedman kind of idea. But one thing that has happened, you need, and Adam Smith understood this, you need some kind of moral, ethical, legal constraints on this kind of greed seeking. And you need to have some kind of regulation of this both through our ethical norms, but also through laws to prevent this from getting out of hand.

[00:09:59] And as one of my students put it, the way our financial system works now is that greed has become weaponized. It's become weaponized by those with money and power to make sure that most of the wealth accumulates to them and relatively little accumulates to everybody else. Yeah, evil people, I'm not sure, but it's an evil system, for sure, the way it's operating now.

[00:10:21] So the question is, to get back to the question, is what can we do about it? And that's where the clubbusters come in. So my book is about, as you said at the beginning not just about the bankers club, that is this group of powerful allies that the bankers have, but it's also about those individuals and groups that have tried to fight against this system and to reform it.

[00:10:46] And so in my book, I spend quite a bit of time talking about these different groups and some of these different individuals. I've interviewed a number of them. I've participated in some of these activities. So this is a really important part of the story. 

[00:11:01] Bob Gatty: Okay. A minute ago you said that the Federal Reserve is the chairman of the Bankers Club.

[00:11:07] Explain what you mean by that. 

[00:11:10] Gerald Epstein: So the Federal Reserve, which is our central bank, has always had a soft spot for the bankers. When the Federal Reserve, when the Federal Reserve was created in 1914, 

[00:11:22] Bob Gatty: it was 

[00:11:22] Gerald Epstein: actually explicitly in the legislation, explicitly actually owned by banks. That is, banks Put up the capital.

[00:11:31] There were there's a series of regional Federal Reserve banks that the banks owned and they were on the boards of directors of these banks. And so from the beginning the role of the Federal Reserve was really to promote the interests of the banks and help stabilize the economy and the financial system to help them and indirectly, presumably to help the rest of the economy. After the Great Depression, some of this Power was taken away from the regional banks and the bankers themselves and put more in Washington in the board of governors of the federal reserve, yet banks still retained a special position in the fed now Even to this day when this formal ownership isn't very important. It's more of a political process the banks the federal reserve tends to see the world through what I call finance colored glasses That is, they see the world through the way the bankers see the world, especially the big bankers.

[00:12:30] Why is that? It's partly because they have to operate through the banks when they make their monetary policy; when they set their interest rates, for example, they need the banks to pass these interest rates along so that it'll affect the whole economy. When they operate in the foreign exchange markets or in the global financial They have to buy and sell securities through, through the banks and so forth.

[00:12:52] They need the banking system to be the transition mechanism for their policy. That's one reason. But there are more perfidious kinds of reasons as well. There's the revolving door. That is, many members of the Federal Reserve top officials and staff members, Either come from the banking community or after they're done with their public service, then they get high paying lucrative jobs in the banking system.

[00:13:18] So there's a self interest involved here as well. Finally, and this in some ways is I think the least understood point, the Federal Reserve Likes to have its own autonomy. We have this idea of the independence of the Federal Reserve. We want the Federal Reserve to be an independent financial institution.

[00:13:39] It would be like saying, we want the Pentagon to be independent of the government. Or we want the state department to be independent of the government. People say we need the federal reserve to be independent of the government which I think is a crazy idea, but the fed likes that.

[00:13:53] And the way that they sustain their independence from the government is they have to have an ally, a constituency to help protect their independence. And they, whenever their independence is threatened by Congress or by the president, or They turn to their bankers and say, hey, you go lobby them and tell them to leave us alone.

[00:14:13] So that's another reason why they depend on the banks. So that's why they see their policy through finance colored glasses. 

[00:14:22] Bob Gatty: Meanwhile, the average person, and I would consider myself to be an average person Assumes that the federal reserve is in their corner that they're looking out for them that they're that the fed Is fighting inflation, let's say for the good of the average person, but that's not true.

[00:14:41] Is it that's not true at all 

[00:14:43] Gerald Epstein: No, it's not true at all. Now, of course inflation can does hurt people depending on The rate of inflation it also depends on how big Fast wages are going up to the, for the average person. But the trick is 

[00:14:57] the federal reserve has been given a dual mandate, two jobs by the Congress. One is to keep prices stable, but the second is to maintain high levels of employment. And the thing is when we have an inflation, the way that the fed tries to fight inflation is by raising interest rates, reducing demand for goods and services and throwing people out of work that is raising unemployment.

[00:15:26] So they fight inflation on the backs of workers, basically, that's their strategy. And so my question is where's the dual mandate here? Where is the focus on on employment? And the truth is historically, the Fed always places fighting inflation first. and employment second. Now, why is that?

[00:15:47] It's not because the average person is mostly hurt by inflation. It's because the banks are hurt by inflation. Banks are in the business of lending out money and getting money back later. They want to make sure that the money that they get back after a year or two years or three years Is worth at least as much as the money they lent out.

[00:16:08] And when there's a high rate of inflation, the money that the bankers get back is worth less. On the other hand, borrowers are happy to pay back their borrowing with money that's worth less two or three years down the road. So debtors actually benefit from inflation. Creditors lose from inflation. So the Fed has always focused on protecting the lenders or the creditors, the wealthy people.

[00:16:36] And not protecting the borrowers who tend to be middle class and working class people. 

[00:16:41] Bob Gatty: I've always, every time the Fed increases interest rates in order to combat inflation, it always seems to be counterproductive to me. I just don't understand how by raising the cost to people, that can be seen as reducing inflation.

[00:17:02] Help me, please. 

[00:17:04] Gerald Epstein: You've got it. You've really hit an important point. I don't know if you're probably not old enough to remember the old Wright Patman the Texas Congressman. Oh, 

[00:17:13] Bob Gatty: yeah, I am. I do. 

[00:17:15] Gerald Epstein: And he's the one who used to really, he was the head of the banking committee for quite a while in Congress.

[00:17:20] Bob Gatty: Right. 

[00:17:20] Gerald Epstein: He used to really drive this point home to the Fed. He said, look, what are you doing? You're trying to lower costs by raising costs. That doesn't make any sense. 

[00:17:28] Bob Gatty: Yeah, 

[00:17:29] Gerald Epstein: and the fact is when the fed raises interest rates raises the cost of Mortgages it raises the cost on credit card debt. It raises the cost on borrowing more generally And that credit is an intermediate product.

[00:17:44] It's an intermediate good that is used in the production of everything. So when that Goes up then that raises prices Now if you're a very if you have if you're a company with a lot of market power You then you can pass along that increased cost onto consumers. But if you're a small business person or you're a a less well off home buyer, you can't pass that cost on to anybody else.

[00:18:09] It just affects you. So it's really counterproductive for the federal reserve to raise interest rates, to fight inflation. Unless. Inflation is getting so high that it's really dramatically harming the economy. It's, it would be much better for the federal reserve to figure out what is the source of inflation.

[00:18:29] So for example, in the most recent inflation case, it was the supply side problems, the supply chains got messed up because of COVID. The Russian invasion of Ukraine messed up the food markets and so forth. So the fed would have been a lot better off if it had partnered with the government.

[00:18:46] To try to subsidize these these supply side problems, and just let them improve over time, which is ultimately what happened. 

[00:18:56] Bob Gatty: All right. So how do we get the Fed to change its ways and to serve us all? 

[00:19:02] Gerald Epstein: It's not easy. But again, it comes back to this issue of the club busters. That is, there are groups out there who for many years have been trying to democratize the Federal Reserve.

[00:19:11] That is what they mean by that is by getting more influence from working class people, from unions, from middle class Americans in the power structures of the Fed. So for example, we have this, these regional federal reserve banks that are in many different parts of the country.

[00:19:30] So there have been groups like FedUp and other groups the AFLCIO at a certain point worked on this to try to get more labor and community people on the boards of these regional federal reserve to try to get them to pay more attention to the needs of these peoples in these communities.

[00:19:48] Now the then we also have to try to get more of these people as representatives on the board of governors of the Federal Reserve. And there's been some there's been some progress there. President Biden did appoint a number of people who are on the more progressive end of the spectrum to the Board of Governors of the Federal Reserve.

[00:20:07] So that will help as well. And there are a number of other factors, but we just need more representation from non bankers and the small bankers and community bankers and working class people in these Federal Reserve institutions. So that's okay. That's one thing.

[00:20:24] Bob Gatty: Okay. There's a lot of distrust about the way things work today with CEO pay so high, nearly 400 times higher than the typical voters pay. And I think that's part of why Donald Trump has so many supporters because people are just generally pissed off and don't trust the system the way it currently is.

[00:20:45] And he feeds into that. What can be done about it? 

[00:20:49] Gerald Epstein: I agree with your point that I think the, a lot of people are just very distrustful of the government and they don't see the government really bringing these powerful actors under control. And there's been such a huge increase in the inequality with all the income and wealth flowing to the top, including to the CEOs.

[00:21:08] Now the paradox, of course. Is that Donald Trump is just going to make that worse. He did last time he was in office in 2016, he tried to to raise the income and wealth of the top 0. 01%. But to get to your point, what can be done about this problem of rising. Inequality?

[00:21:30] First of all, we have to understand the political configuration here. The CEOs of these big non financial corporations are for the most part members of the bankers club. The bankers and the non financial CEOs are in the same club now. That wasn't always the case. In my book, I talk about the Great Depression and the New Deal from the put together by the federal FDR's administration.

[00:21:57] And at that point, after the Great Depression, FDR and the New Dealers were able to bust up the early Bankers Club. They passed legislation like the Glass- Steagall Act and so forth that separated Investment from commercial banking broke up the big banks and a lot of the CEOs of non financial companies, steel companies and so forth.

[00:22:19] They sided with FDR on this. They were fed up with the bankers. They said, Look, you helped to cause the Great Depression. We don't want to be in your camp anymore. We're going to regulate you to make sure that doesn't happen again. This time, after the great financial crisis of 2007- 2009 and they were trying to push, Obama was trying to push through the Dodd Frank legislation the CEOs of these big corporations, they sided with the banks.

[00:22:45] They didn't side with the Obama administration. Why is that? It's because these companies their CEOs are, have amassed a huge amount of wealth. And they want the bankers to be able to manage their personal wealth in such a way that they can avoid taxes, they can move the money overseas, they can get special deals with IPOs and other kinds of special deals with financial arrangements.

[00:23:11] So they're really in, in cahoots with the big banks and they have formed this kind of wealthy group at the top 0. 01%. So how to bring it under control? First of all these clubbusters again, people in Congress like Elizabeth Warren, Bernie Sanders and others as well as others at the state and local level have to tax have to raise the taxes on the wealthy.

[00:23:34] The Biden administration has pushed for a wealth tax. Janet Yellen has pushed for that. So that's point number one point. Number two, we have to create a different way of corporate governance where we don't just have. The bankers and the CEOs scratching each other's backs and saying, okay, we'll give a huge salary increase to your CEO if you'll give me a huge salary increase to my CEO.

[00:23:58] And finally we need to really reduce the wealth and income of the bankers themselves who are driving up all of these CEO pay raises. As part of a financial fight to raise the wealth and power of the top 0. 01%. So we've got to bring the bankers under control as well. 

[00:24:16] Bob Gatty: Okay.

[00:24:17] A lot of this over these overall financial issues affect racial issues, I think, right? 

[00:24:27] Gerald Epstein: Yes. 

[00:24:27] Bob Gatty: We're talking about racial inequality that occurs racial wealth inequality, I guess you would say. 

[00:24:33] Gerald Epstein: Yeah. That's for sure. And of course we know that banks redlined black neighborhoods in the 1940s, 50s and 60s.

[00:24:43] This was all in cahoots with a racist economic policy by the U. S. government. But it made it very difficult, if not impossible to get capital invested into poor black communities. And they were in cahoots also with real estate agents that were trying to drive blacks out of white real estate neighborhoods and into getaways, black neighborhoods and so forth.

[00:25:08] There was an attempt to improve the situation in the 19 eighties and nineties with the Community Reinvestment Act and with Fair Housing Laws under President Johnson. And then later. Later in those decades, the community reinvestment access to banks. If you want to merge, if you want to grow, You get permission from the U.

[00:25:30] S. Government to do that. You have to start investing more in these poor communities in these African American communities and so forth. Now what happened over time is that there were loopholes in the Community Reinvestment Act, and it was made less effective. But just recently under the Biden administration there have been new rules beefing up at the Community Reinvestment Act to try to get more credit and capital into poor communities, including African American communities, Hispanic communities, and so forth. But the Bankers Club, once again, is fighting this. 

[00:26:03] They've brought cases against the Community Reinvestment Act to their famous their favorite judge in Texas who is putting, trying to put a stay on the Community Reinvestment Act. And so once again, the banks are fighting this tooth and nail. Another thing that happened in the 60s, 70s, and 80s were state laws trying to prevent predatory lending by banks. The kind of predatory lending that led to the great financial crisis, the subprime loans and so forth.

[00:26:33] And the federal government the Bankers Club tried to prevent state laws from protecting against predatory lending. Now once again when there's an attempt to beef up these anti predatory lending laws at the state level. Once again, the Bankers Club is bringing lawsuits, which is coming now before the Supreme Court that will say states cannot control predatory lending.

[00:26:58] Once again, the banks are fighting against all of these attempts to get fair and lending into communities of color of more investment into communities of color. And in order To support these kinds of laws once again, we have to try to bust up the Bankers Club. 

[00:27:15] Bob Gatty: Okay. You talked a minute ago about how the Bankers Club fights increased regulation of the financial industry.

[00:27:24] And you say that Increasing or establishing new financial regulations are not enough. That we need publicly oriented financial institutions, what you call banks without bankers. How about telling us about that? What can they accomplish? 

[00:27:42] Gerald Epstein: So there's again, there's been this whole movement around the country to try to create public banks in 22 different states. There are activist groups who over the last 5 to 10 years have been trying to get through legislation to create public banks, meaning banks that are at least partly or completely owned by the state government or the municipal government who have social missions to provide, for example, credit to communities of color or poor communities or social mission to invest in affordable housing or to invest in green energy.

[00:28:22] And it's been very difficult to get these, this legislation through these state governments. But one place where it's been very successful so far. is California, where in 2019 the governor and the legislature passed a banking law which allows communities to create public banks. And typically what happens is that the government will put in their excess cash as working capital in these banks.

[00:28:48] They might give an upfront capital infusion into these banks, and then they will be able to lend Directly or indirectly for these social missions. A lot of them used what's called the partnership banking model, and this is based on The one public state public bank we have in our country in North Dakota, there's a public bank there that most people don't know about.

[00:29:11] It was created in 19 the turn of the 20th century in 1910 or so. And North Dakota public bank does not lend directly to final customers. It lends to small banking organizations, community banks, and so forth. We've been on lend. To the final customers, to farmers, to cooperatives, to small business, et cetera.

[00:29:34] So that's what many of these public banking operations in the state level and in California and elsewhere are proposing. Let's lend to community finance development institutions that have a specialty in community economic development. We'll lend money to them and they'll onlend to their customers.

[00:29:51] And this is a model that's, Being worked well in North Dakota, they're trying to get it up and running in California, Massachusetts. They have an organization that's trying to do this kind of thing. So the point is just as the commercial banks are trying to withdraw from poor communities. They're trying to withdraw from communities of color.

[00:30:14] They're trying to limit their investments in green technology and so forth under pressure from red States and red and Republican organizations, we need publicly oriented financial institutions that can pick up the slack and invest in these important things and it's a tough fight because the Bankers Club fights them every inch of the way.

[00:30:35] They try to prevent this legislation from getting through, but we have a lot of dedicated activists around the country who are really working very hard to make this happen. 

[00:30:44] Bob Gatty: Is there any chance at all that this kind of thing could occur at the federal level through Congress? 

[00:30:51] Gerald Epstein: I'm glad you raised that question because the fact of the matter is, at the state and local level, no matter how many of these smaller banks get created it's not going to be up to scale to really be a true alternative to the mega banks.

[00:31:05] So we do need federal legislation to help support this and to create federal level banks. Now, There is a bill before Congress from Alexandria Ocasio Cortez and others that are creating, trying to create a federal framework for public banks to have a pathway for public banks to be members of the Federal Reserve System so they can get liquidity support from the Federal Reserve to try to create a regulatory structure for these public banks.

[00:31:37] So that's a very important bill before Congress to try to bring this up to the larger scale. We actually have in the Inflation Reduction Act, the bill that Biden administration passed, a green bank, the starting of the first national green bank development bank in the U. S. It's only a 20 million initial capital subscription, but that can grow.

[00:31:59] So we need these kinds of national level of banks. Finally, we have a national level bank. It's called the Federal Reserve System. If we were to make the Federal Reserve System more a public bank and less a bank for the bankers Then we can really get going here. And what I'm arguing for is that the federal reserve should devote at least as much money to these kinds of social projects as it has devoted to bailing out the banks first in 2007 2008 and the With the pandemic in 2020 and again, we're thinking about just a year ago. We had Silicon valley bank and signature bank and These other banks that were going under so if the federal reserve would just devote as much attention to building up public banks And socially oriented banks as they do to propping up the mega banks.

[00:32:50] We'd be in pretty good shape. 

[00:32:51] Bob Gatty: But the problem is that the system that we have with all these lobbyists fighting for industry is going to make it really hard for this kind of sweeping reform to take place, right? 

[00:33:03] Gerald Epstein: It does make it hard for sweeping reform. I agree with you. That's one reason why this upcoming election is so important.

[00:33:09] There are many reasons, but one of them is that the the Republicans and Trump in particular want to get, try to get rid of all these regulations. That's why they've packed the federal courts and the Supreme Court full of justices who are actually trying to make it impossible to regulate these institutions.

[00:33:27] Now but that's not going to be enough. That is we need to try to get money out of politics. Get rid of citizens united And that kind of thing 

[00:33:38] Bob Gatty: right? 

[00:33:38] Gerald Epstein: So all of these things have to work together, but it's not hopeless. The point of my book is that even even small attempts by these groups trying to create public banks or by the americans for financial reform trying to push forward the community investment act or better markets try, trying to limit cryptocurrencies and so forth.

[00:33:59] All of these efforts make a difference. And so people should just figure out where, who are the clubbusters in their area? What are they trying to do? Are they trying to limit J. P. Morgan's investments in fossil fuels? Or are they trying to or in your area, is there a group trying to form a public bank?

[00:34:17] Et cetera, or is there a way to get involved in the election? I think that as long as we can keep the club busters moving forward some of this is going to stick. And eventually if we can fight back fascism and fight back Trumpism, then at least we'll have a space to really make some of these changes.

[00:34:36] Bob Gatty: I'm glad you brought up Trumpism because to me that is a extremely serious threat to our to our country, especially when it comes to economics and you're discussing that if he should win, what would be the impact economically on the average person, do you think?

[00:34:57] Gerald Epstein: We just have to look at what he did he and his administration did in 2016 and multiply it by a factor of something, a factor of two, four, six. So what he subscribes to a combination of this trickle down economics; that is let's cut taxes on the wealthy, on the corporations and so forth.

[00:35:17] And claim, it's not really, it's pseudo trickle down because they don't really believe that it's gonna trickle down. What they say don't is we're gonna cut this and it will trickle down. They know what's not gonna trickle down and raise wage raise employment, raise productivity.

[00:35:31] So that's number one. And they'll do that again. And then they'll use that as an excuse to cut. Government spending on entitlement programs, on welfare, on social security, and so forth. So there's all that we can expect that they will do. And that's gonna hurt workers, it's gonna hurt middle class people it's gonna hurt everybody but the top one or 01 percent of the income distribution.

[00:35:54] Bob Gatty: Do you have any idea then, do you have any idea then why all these average people support Trump? Do they not understand this? 

[00:36:02] Gerald Epstein: You had the theory, your theory that you said was that they're really pissed off at the government because the government hasn't done enough to help them in the past 

[00:36:12] Bob Gatty: and that 

[00:36:12] Gerald Epstein: government has been, they hadn't met, had handmaiden, of the bankers club and all this in the past, but it's just the frustrating thing to me though, is that Biden administration is certainly not perfect.

[00:36:24] It's certainly not the ideal. However. The Biden administration has done a lot more than almost any other administration in recent here history to try to raise wages, to try to protect health insurance, to try to cut student debt, to try to invest in American jobs, high paying jobs and green transition.

[00:36:43] And the economic recovery we've had since the COVID crisis has been among the best economic recovery we've ever had. They're just not getting the credit for this and I'm as puzzled as anybody else as to why they're not, do you have any ideas about that? 

[00:37:00] Bob Gatty: Except that Trump is a master at spinning these lies and talking in a way that, the average person, the average Joe identifies with.

[00:37:16] Yeah. And in his own simplistic ways, he convinces people who don't have the knowledge or ability or interest or whatever to do any kind Of background checking or research on their own to understand what really is happening. Instead they just listen to this guy. He's like a snake oil salesman, and and they believe is and they believe him. To me it's just pretty simple. I live here in South Carolina, and I just cannot believe the people who live in broken down trailers, and they have giant. Trump banners out front. I just don't, 

[00:38:04] Gerald Epstein: but one of one of my goals in writing this book was to try to write it in such a way that I could explain how our financial system works, what's wrong with it and what we can do to fix it in terms that just about anybody can understand.

[00:38:19] Now, I'm not expecting I'm not a very, a die in the wool Trump supporter to read and agree with my book necessarily, but if I can just do a little bit to try to reach people who are trying to understand why this financial system is really hurting them, and that we have alternatives that will really help them, and that people like Donald Trump don't want to help them.

[00:38:40] I, I will have, succeeded a bit in, in my attempts to, to promote some of these ideas. 

[00:38:45] Bob Gatty: Actually, I think you did a great job. You were kind enough to send me a digital copy of your book and I found it fascinating and it is written in a way that people can easily understand and grasp. The topics are not easy and for many people, maybe a little bit boring. But the fact of the matter is that unless changes are made the money people are just going to stay in control. True? That's right. 

[00:39:18] Gerald Epstein: That's absolutely right. And that's why I think everybody from From the Trump voter to the Biden voter to in between.

[00:39:25] Bob Gatty: Yeah. 

[00:39:25] Gerald Epstein: Has an interest in trying to make these changes. 

[00:39:29] Bob Gatty: Okay. Having said that, where is where can people find your book? I know it's on Amazon. 

[00:39:35] Gerald Epstein: Yeah, but there also, you can go to the University of California press website, and there's a whole list of books. Other places, including independent booksellers that you can buy, Powell Books, all the independent booksellers have it.

[00:39:47] Bob Gatty: Okay. Is it in in, digital form audio book, any of that, or what? 

[00:39:53] Gerald Epstein: Yeah, so you can, there's an electronic version. If you go to the University of California Press, put in Bankers Club, you can just, you can buy a an e book. And there's a audio book being made at this moment, and I'm not sure when it'll be out, but it should be out hopefully by the summer.

[00:40:10] Bob Gatty: Very good. All right. Gerald Epstein, thank you so much for being with us on the Lean to the Live podcast. 

[00:40:15] Gerald Epstein: Thanks a lot for having me.

[00:40:16] This was a lot of fun. I appreciate it. 

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