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The Case for a US Public Banking Option

A forgotten lesson of the New Deal era is that a public option for basic services can both ensure universal access and empower regulators to curtail abuses. In the case of consumer finance, a public bank would go a long way toward improving the economic security of all US households.

LOS ANGELES/SARASOTA – Because the consumer financial-services industry is structured to maximize profits and payouts to shareholders, it inevitably fails to meet the basic banking needs of ordinary American households. Too many people lack access to the financial infrastructure – check cashing, money transfers, bill payment, and consumer credit – that is necessary to participate fully in the twenty-first-century economy.

This is not just a problem for those on the fringes of society. According to the Federal Deposit Insurance Corporation (FDIC), one in four households either does not have a bank account or must resort to high-cost or predatory services like payday loans. In either case, financial exclusion is preventing too many Americans from achieving basic economic security.

To address this widespread failing, we propose a government-provided public option in consumer financial services. A public option would set a true floor in the banking sector, by providing the financial infrastructure needed to ensure universal access to basic services. And, by adding an element of public-private competition, it could be structured to prevent financial fraud and other abuses that currently run rampant in the industry.

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