[Peace-discuss] Politics, not personal purity

[C. G. Estabrook]

[The following article appeared in Left Business Observer #124, January 2010. 
Copyright 2010, Left Business Observer. --CGE]

Move your money…

Few pieces in the 23-year history of LBO have attracted as much hostile 
correspondence as “Web of nonsense” in #119. It was a critique of the mode of 
thought, almost foundational to a brand of populism on both the left and the 
right, “that sees the problems of capitalism — like the polarization of rich and 
poor and the system’s vulnerability to periodic crises — as primarily financial 
in origin.” While this tendency has a long history, and pervades a lot of the 
pseudo-radical tradition in the U.S., it always achieves special prominence at 
the time of financial crises.

To reprise for a moment before taking on a fresh eruption of the syndrome: 
capitalism is a system organized around money. Almost nothing is undertaken in 
the realm of production for reasons other than the accumulation of money. As the 
money accumulates, something must be done with it, which is why financial wealth 
expands over time. But even though that financial wealth often seems to inhabit 
a world of its own, it is ultimately connected to what Wall Street calls the 
“real” sector. For example, all the mortgage securities that caused the recent 
mischief were ultimately connected to one of the most basic needs of all, 
shelter. There is no way to separate neatly the monetary from the real. The 
social problem emanating from the securitization of mortgages isn’t only the 
increasingly baroque development of financial assets but also the 
commodification of the house and its transformation into a speculative asset. 
Which is why populist financial reforms can’t take you very far: they address 
symptoms, not pathogens.

Bust a move

But that never stops people from trying. The latest populist spasm is Arianna 
Huffington’s “Move Your Money” campaign, which would have those of us with money 
in large banks move it to small ones. This touches on another foundational 
populist fantasy: that virtue and size are inversely related. Her website, which 
thrives on the unpaid labor of hundreds of eager contributors, even provides a 
helpful list of convenient local banks if you enter your zip code.

What’s wrong with this scheme? Several things. First, many small banks have more 
money than they can profitably invest locally. As Barbara Garson shows in her 
wonderful book, Money Makes the World Go Around, the portion of her book advance 
she deposited in tiny upstate New York bank was probably lent via the fed funds 
market to Chase, where it entered the global circuit of capital. This is not at 
all uncommon. Money is fungible, protean, and highly mobile even when it looks 
locally rooted. That very mutability is part of what makes money so valuable: 
it’s the ideal form of general wealth that can instantly be turned into caviar, 
lodging, Swedish massage, or shares of Google.

The point can be further developed by looking at some of the banks that 
Huffington’s site recommends. Entering LBO’s zipcode, 11238, into their helpful 
little machine yields several suggested receptacles for one’s savings. One, the 
black-owned Carver Federal Savings Bank, is a major financer of the 
gentrification of predominantly black neighborhoods in Brooklyn and Queens. As 
those neighborhoods get richer, Carver boasts, it’s partnering with Merrill 
Lynch (a subsidiary of the Bank of America) to offer wealth management services 
to the flusher new residents. Another suggestion, Apple Savings Bank, has about 
three-quarters of its assets in securities like U.S. Treasury bonds, not local 
loans. They don’t come much bigger than the U.S. Treasury. And a third, New York 
Community Bank, which even features that precious word in its name, financed a 
private equity group that bought up a lot of apartment buildings in New York in 
the hope of squeezing out the rent-regulated tenants and replacing them with 
more lucrative ones paying market rents. With the real estate bust, the PE firm 
is having trouble servicing its debts, and the residents of its buildings are 
suffering as services are cut further.

Yes there are some decent places to park your money, like community development 
credit unions. But there’s only so much they can do with their holdings. There’s 
no way they could accommodate even a small fraction of our near-$8 trillion in 
bank deposits without turning to Treasury bonds or Merrill Lynch wealth 
management services. Getting banks under control is a matter of politics, not 
individual portfolio allocation decisions.

Move your money and it’s still money.

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