When someone like Oscar Perry Abello, one of a small handful of journalists with deep and broad knowledge of the important innovative solutions to systemic economic justice, finally decides to write a book, my first question is why it’s not about those new things that are delivering economic power to those who have been historically denied but is instead about the staid, brick and mortar world of banking.
“Banks are the missing piece for everything” said Abello, who is taking a book writing leave from his day job as senior economics correspondent at Next City.
“I’ve been reporting for eight years on shared models of ownership and real estate, written ways of reversing redlining. But you can connect all the dots through the banking system, and it should become what it was in the past and what it could be in the future. Banking is the missing piece.”
All the new models of community-based investing, catalytic impact investing at the local level, would be so much easier if bank consolidations and the finance gaining an almost unchecked power over the economy had not whittled the number down from 15,000 community banks in 1985 to just a bit more than a quarter of that number. There were 4,750 community banks in 2019, according to the FDIC. Post-pandemic, that number was reduced to 4,001 by December 2022.
Why does the loss of local, community-focused banks matter?
Because banks are empowered by the federal government with creating money, literally through loans. When you take out a $100,000 loan from a bank, they don’t go back into the vault and grab that much from deposits. The loan creates new money. David Graeber’s book, Debt: The First 5,000 Years, is the best source to learn more about the history of banks’ ability to create money out of thin air, Abello says.
If new community banks and credit unions were in place, coupled with the new financial innovations creating economic justice, we could repair our local economies, Abello explained.
“In 1985, there were 15,000 money-creating local institutions,” Abello said in the Next City article where he explained why he’s writing the book.
Nearly all of the community banks were guilty of redlining, and women couldn’t open a bank account or a loan without a husband or relative’s signature until 1974. “But even with those flaws, each local bank functioned as a local fountain of money.” A bank charter is the power to create money in your local community.
If the bank were listening to the needs and desires of the local community, rather than imposing their plans on the low income neighborhoods on behalf of the affluent neighborhoods and in service to corporate power in the way the new financial innovations have been learning to do, community banks could indeed be the missing piece of infrastructure to repair local economies.
Abello sees encouraging banking and credit union startups happening from Arkansas to Minneapolis to the Bronx, but he says each isolated innovator is having to figure it out on their own. Unlike 30 years ago, now there is no group of experienced bank and credit union startup entrepreneurs to learn from.
One of the startups Abello has written about is a credit union started by a barber in an Arkansas small town.
Even more ambitious is Walden, a bank in New Hampshire built to scale up local food systems in the northeast.
Walden is a mutual bank; a bank controlled by its depositors, not its shareholders. Once fairly common, Walden is the first mutual bank created in almost 50 years: https://nextcity.org/features/banks-with-no-shareholders-the-curious-case-of-mutual-banks
Abello’s book will go into depth into both the historic and systemic issues that call for a revival of community banks as the missing piece to create a just economy. In addition, he will go into depth on each of the innovative new credit unions and banks being created and dive into some notable failures along the way.
Abello further explains his ideas: “We once created an ecosystem that created money on a very widespread basis. Today, 50% of bank deposits are in foreign and large banks. That’s not how we built this country.”
“We won’t be able to invest in the areas that are disinvested today, we won’t be able to make the climate change investments we need to make, to build the housing we need” if we don’t bring back community banks, Abello said. “We need to reclaim credit, as a tool for society, not just a thing that capitalists used to oppress people. Banks are the missing piece that we need to recreate, locally, in communities.”
The book is scheduled to be out in the fall of 2024. Meanwhile you can support Abello’s work by becoming a regular contributor through Patreon for as little as $5. https://www.patreon.com/oscarthinks