September 26, 2024
Source: Catalyst
Source: Glen Scarborough Wall Street. Flickr.
Source: Glen Scarborough Wall Street. Flickr.
LONG READ
As a lonely critic who dared to challenge Federal Reserve Board chairman Alan Greenspan during the stock market mania of the late 1990s, then congressman Bernie Sanders received recognition from the political left and dismissive coverage from the mainstream media. Sanders subsequently won significant national attention as an outspoken populist critic of the banking system in the wake of the 2007–8 financial crisis. After declaring his presidential candidacy in 2015, he cemented this reputation as the nation’s preeminent critic of bankers, using the campaign to express the anger that many Americans shared about the financial crisis and the resulting bailout. “If elected president,” Sanders pledged, “I will rein in Wall Street so they can’t crash our economy again.”1 Hillary Clinton conceded the appeal of this campaign promise when — panicked by the popularity of Sanders’s attack on finance and unable to respond effectively to his criticisms — she sought to change the subject by exclaiming, “If we broke up the big banks tomorrow . . . would that end racism? Would that end sexism? Would that end discrimination against the LGBT community?”2 The stand that Sanders took against the banks was compelling, true to the contemporary moment, and appeared novel. But although unfamiliar to the times, opposing the excesses and power of bankers was hardly original. Sanders emerged as the successor to an influential strand of American political culture with deep historical roots that has motivated far-reaching economic demands in the past and could do so again in the future.
As the Sanders campaign demonstrated, while banking is widely considered to be dry and dull, it’s nevertheless an issue that can energize working-class politics. Discussing and debating banking calls attention to opposing material interests, which promotes a politics that is attuned to questions of class. Workers confront the relevance of banking to their daily lives every time they check their account balance or pay a bill.3 When Sanders presented financial policy as a clash between Wall Street on the one hand and “working families” on the other, he articulated a class-based populist message that could reach a diverse spectrum of working-class voters. In the past few years, local single-issue groups promoting public banks made real headway in several heavily Democratic cities and states. Among other issues, their campaigns foregrounded green energy projects and unequal credit access due to racial discrimination. This messaging excites liberal Democratic politicians, but its capacity to forge broader coalitions and inspire the solidarity that sustains working-class politics is more limited.4
A look at the past reveals that banking programs that are framed in universal terms can offer an effective organizing device with widespread appeal. Shared commitments to remaking the banking system were the cornerstone of an influential American political tradition. In the late nineteenth century, the “money question” galvanized two mass political parties that protested Gilded Age inequality, the Greenback and Populist parties. In the early twentieth century, large numbers of workers and farmers across the nation rallied around banking reforms as a means to make American society more democratic. Seen in the light of this history, the promise of material benefits from government banking continues to present a source for working-class political mobilization today.
Recent polling indicates that the public is dissatisfied with the private banking system. In 2024, the Pew Research Center revealed that 60 percent of Americans think that banks have a negative effect on the nation. This discontent with the current banking system is bipartisan: Democrats and Republicans were equally likely to view banks as having a negative impact.5 Such an outlook conformed with the findings of earlier surveys. A 2016 poll by Edison Research found that a majority thought Wall Street — a term commonly used for large banks — did more to hurt than to help the lives of Americans, an opinion that prevailed across racial, gender, educational, and partisan lines, with one exception. The only group that bucked this pattern were those with postgraduate educations, though here, too, a plurality thought Wall Street did more harm than good.6 And these poll results aren’t a post–financial crisis phenomenon. When Louis Harris and Associates conducted polling on the subject in 1996, amid an economic boom, the firm’s chairman concluded that the public’s impression of Wall Street was “awful.” In the survey, 61 percent of Americans agreed that Wall Street was “dominated by greed and selfishness” and 64 percent agreed that “most people on Wall Street would be willing to break the law if they believed they could make a lot of money and get away with it.”7
Government banking could open up new economic possibilities. Absent the imperative to maximize profits, public banks from the local to the federal level could help advance social democratic policies. Operating under the mandate to promote social welfare, such banks could help finance universal government programs. Public infrastructure projects would be prime candidates for these loans. Importantly, government banking would bolster public control over capital flows. Increasing funding opportunities for social goods and government services would invigorate the public sector. Government banking could allow for greater public management of capital allocation among different economic sectors and make investment decisions more democratically responsive.
Securing these results would demand that the administration of government banks be organized around public transparency and accountability. Publicly appointed and elected governing committees would help hold decision-makers responsible to voters. Fostering interaction between government banking officials and the people their decisions affect would promote the leadership’s concern for social needs and public opinions. Requiring officials to consult regularly with the full spectrum of social stakeholders through advisory councils and open meetings would offer a means of institutionalizing such connections. Placing officials under regular oversight and review by elected legislatures would further promote democratic responsiveness.
Opponents of government programs habitually claim that Americans are inherently opposed to government programs. Yet voices on the political right are among those questioning this cliché. In a 2024 survey, American Compass, an organization that advocates a “new conservative economic agenda,” found “vanishingly little support across parties for reducing any of government’s major roles.” Under one-fifth of those polled thought government programs were “usually unhelpful,” while the majority were open-minded on the subject, stating that they “don’t believe a general rule of thumb [on government’s role] makes sense.”8 This undoctrinaire verdict indicates that most Americans can be receptive to the merits of government programs — an attitude that has historical precedent in the United States. The twentieth century witnessed the New Deal, President Lyndon B. Johnson’s Great Society, a slew of reforms during President Richard Nixon’s administration, and numerous other government initiatives. More recently, right-wing opponents of health care reform fervidly attacked the Affordable Care Act and framed it as emblematic of “big government.” During the past decade, this law has gained steadily in public acceptance, and all but ten states — mostly in the South — have adopted the program’s Medicaid expansion.
Banking for the People
Though bankers might seem omnipotent, the nature of banking makes the entire sector susceptible to public pressure. The very mechanics of banking yield major vulnerabilities to negative popular opinion: there is always the risk of depositors withdrawing their money and closing their accounts. In the early 1980s, boycotts targeting banks proved an effective tool for activists defying deindustrialization in western Pennsylvania. In one instance, such a boycott helped protect thousands of workers’ pensions and severance pay. In another, a threatened boycott reversed plans to shutter a plant employing 650 workers.9 Strategically more significant is the leverage that the public has over banking in the political realm. While the political influence of bankers is well known, their need to pursue self-protection through political involvement is less noted. Banks are reliant on government, particularly the national government. The private banking system is both a relatively regulated branch of the economy and favored with the privilege of a federal safety net, which is integral to its existence. The banking system depends on confidence rooted in continuing support from the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve System, and ultimately the federal government itself. The current power of bankers is less a structural matter of course than the consequence of an absence of political challenges.
During the early twentieth century, the private banking system faced significant grassroots criticism. Keen public interest in financial questions reflected the political inheritance of Greenbackism and Populism. Influenced by these traditions, and also by the rising socialist movement, many Americans looked forward to establishing government banks.
Discussion of the subject of government banking evokes an enduring line of historical inquiry: “Why is there no socialism in the United States?” Over the years, numerous explanations have been offered to this question, including racial and ethnic animosities, high levels of social mobility, an entrenched two-party system, and an intensely individualistic culture. More recently, historians writing in the latter part of the twentieth century interrogated the premise of this question itself, revealing that socialism not only existed in the United States but had roots in the American heartland. Their research situated small Midwestern cities of the Progressive Era, the countryside of Oklahoma during the same period, and the nineteenth-century Indiana milieu that produced Eugene V. Debs at the center of the nation’s socialist history.10 When historians recovered the socialist past of the early twentieth-century United States, they also resurrected the memory of the movement’s substantial appeal to workers and farmers. In 1920, Debs famously received close to one million votes for president while imprisoned at the Atlanta Federal Penitentiary due to his opposition to World War I.
Yet an important dimension of the question of socialism’s appeal remains comparatively neglected: the prevalence and popularity, beyond the Socialist Party of America, of economic ideas that intersect and overlap with socialism. In this article, I will explore an aspect of the American past that has been lost: a mass movement of working people who sought to socialize banking. During the first half of the twentieth century, widespread public condemnation of the private banking system and the bankers who controlled this fundamental feature of capitalism led to broad support among working people for creating government banks and nationalizing privately owned ones.11
The appeal of government banking to early twentieth-century Americans resulted from a remarkable level of popular engagement with financial policy questions, one largely absent today. Material concerns drove these workers and farmers to push for a banking reformation that would make the economy more equitable. Such critics of the banking and monetary status quo thought broadly about economic matters. But there was a smaller, less influential group whose interest in money was narrower. An exclusive focus on financial affairs led these critics to believe that the only necessary economic change involved tinkering with money. Among these were establishment figures whose attempt to use monetary reform to forestall other economic reforms reveals the reactionary motivations behind such programs. During the Great Depression, for example, one conspicuous lobby for inflation — the Committee for the Nation — was an organization of business executives who opposed the New Deal. There were also politically and socially marginal reactionaries, typically of an antisemitic variety, whose conspiracy theories incorporated financial nostrums. The political program of the 1930s protofascist group the Silver Shirts, for instance, addressed monetary matters. A distinguishing feature of their program was the doubtful proposition that replacing physical currency with a network of checking accounts would eliminate “money crimes” like robbery and the extortion of ransom through kidnapping.12
While groups such as the Committee for the Nation and the Silver Shirts attempted to turn mass involvement with financial questions to their own ends, elite-orchestrated and fringe political programs unfolded apart from the grassroots banking politics of working people. Truly populist banking politics, by contrast, was rooted in labor unions and farmer groups, institutions that working people organized, led, and funded themselves. Numerous worker and farmer institutions, from the local to the national levels — ranging from the Chicago Federation of Labor to the National Farmers Union and the United Mine Workers of America — provided forums where heterodox financial ideas circulated, including the belief that establishing government banks would combat the abuses of the existing financial system as a whole.
On an individual level, working people were interested in banking because they wanted safety for their savings and greater access to credit. The motive here was less about becoming rich than about attaining the modest prosperity that would offer basic financial security to them and their families. They also hoped to overcome the economic, political, and social threat posed by the concentration of vast financial power in only a few hands. Opponents of the “money power” endeavored to tame it for the sake of democracy. Working people understood Wall Street to be the headquarters of capitalism, autonomously deciding where investment would and would not be channeled. They believed that the profit-seeking excesses of large, unaccountable financial institutions frequently threatened economic stability.13 Accordingly, on this front as well, working people’s quest for financial security made reforming the banking system a priority for them, because they understood that, operating with minimal oversight, banks both caused and magnified the recurring depressions that regularly wreaked havoc in the nineteenth and early twentieth centuries.
The collective political action that emerged from policy discussions within organizations of workers and farmers drove significant changes to the banking system from the 1910s through the 1930s. A major impetus for most of the era’s banking reforms was persistent public pressure, consistently expressed through elected officials, for more government involvement in this critical sector of the economy. In comparison with today, the banking system operated more autonomously from government, stamping this reform agenda as a clear break with past practice. Still, the vigor of popular involvement in grassroots banking politics produced victories despite the burden of precedent and the banking fraternity’s bitter resistance. The possibility of government enterprise in the form of public banks presented a sweeping policy option that loomed over all contemporary financial debates. The threat of such a radical step eased reforms that now appear moderate but were opposed adamantly by bankers at the time, who attacked the FDIC, Farm Credit System, and now defunct Postal Savings System. Contrary to their fears, following its establishment in 1934, the FDIC brought unprecedented stability to the banking system. It was the keystone of a reformed financial order that no longer fueled sharp booms and busts, providing a foundation for post–World War II mass prosperity and neutralizing future demands for far-reaching changes to banking.
Historical accounts of mass engagement with financial politics in the modern society that emerged between the Civil War and World War II have emphasized monetary debates, especially the 1890s conflict over the currency that arrayed the gold standard against bimetallism (basing money on both gold and silver). But grassroots banking politics in the early twentieth century was less focused on how money ought to be defined than on the purpose of financial institutions. Making finance accountable to the material and moral concerns of working people was at the heart of this mass movement. Its supporters believed that stripping the control of money and credit from bankers would end the profit motive’s power not only over individuals but also over investment decisions that shaped larger economic developments. The idea of organizing banking to serve working people — instead of exploiting them — mobilized workers and farmers, who pursued a populist economic vision that aligned with socialist ideals. In his 2016 campaign, Sanders revealed that financial reform can still motivate working-class voters today.
Greenbackers, Populists and Socialists
The 1928 and 1932 Socialist Party vice presidential nominee James H. Maurer entered politics through his involvement in financial reform. His political activism was pivotal to the development of the strong socialist movement in Reading, Pennsylvania, that peaked in the late 1920s.14 Socialism in the city was rooted among its largely Pennsylvania Dutch working class — a background that Maurer shared. Overcoming poverty and illiteracy, he forged an alliance between organized labor and socialism in his hometown, eventually becoming president of the Pennsylvania State Federation of Labor. A newsboy at six years old and a factory laborer at ten, at sixteen Maurer was an illiterate apprentice in a machine shop. But his life changed forever thanks to a politically active machinist who taught him how to read. Under this fellow worker’s tutelage, Maurer embarked upon an intensive program of self-education on the topics of “banking, the gold standard, bimetallism, paper money, inflated currency, contracted currency, free coinage of silver.”15 He had become one of many working-class students of finance during the late nineteenth and early twentieth centuries.
Learning about financial issues was an empowering experience for Maurer. “Before I was seventeen,” he recalled, “I believed I knew more about banking and the manipulation of money than most Congressmen did.” Although too young to vote, Maurer became an enthusiastic member of the Greenback Party. Greenbackers wanted the federal government to combat the frequent economic depressions and ruinous deflation of the late nineteenth century by printing large amounts of paper currency. Through his involvement with the Greenback Party, Maurer learned the mechanics of political organizing, carrying the flag in the party’s parades, distributing its literature, and generally doing whatever work needed to be done. By the 1890s, the Greenback Party was moribund, but its financial ideas had a new home in the growing Populist movement — a mass protest against laissez-faire capitalism that won adherents among Midwestern wheat farmers and Southern cotton farmers, Western miners and urban construction workers. Maurer found himself in great demand as a speaker at Populist events throughout Pennsylvania. “Bankers particularly came in for scathing abuse,” he recalled. “We handled them without gloves.”16
The banker was a figure who represented unearned wealth and unaccountable power. Casting a critical eye on the riches that bankers enjoyed and the undue influence they exercised helped contemporaries think in more systemic ways about the unfairness of economic arrangements that privileged some and disadvantaged others. The Panic of 1907, for example, was caused by a reckless and bungled attempt to corner a mining stock and the ensuing failure of banks connected with the unsuccessful speculators. The federal government hurried to rescue shaky banks with a sizable no-interest loan. Meanwhile, the economic depression that this financial crisis caused threw millions of workers out of their jobs. A socialist member of the United Mine Workers of America blamed the depression on the “instability of our present banking system . . . augmented by . . . stock gamblers and money sharks, beside whom a common horse-thief or safe-breaker would be a respectable citizen.”17
In the aftermath of the 1907 crisis, the largest-circulation socialist newspaper in the nation, the Appeal to Reason of Girard, Kansas, used banking to dramatize the disparate nature of government involvement in the economy. “What is a banker to do in a financial crisis if he is out of cash?” the newspaper asked. “Come to the United States treasury and help yourself to government money.” The federal response, the Appeal observed, was entirely different in the case of unemployed workers. “What is a man to do who is out of work in a financial crisis and is starving? God knows!”18 The privileges that bankers enjoyed provided the Appeal with an instructive case study of how, despite criticisms of socialism that romanticized laissez-faire principles, government was already active in the economy. Government’s finger was tipping the scale in favor of capitalists and against working people, whereas socialism would orient government efforts toward aiding the working class.
When socialists criticized bankers and the privately owned banking system, they connected with an established pillar of working-class political culture. Large numbers of workers and farmers studied, discussed, and debated a variety of financial reforms. And with a lineage extending back to the Greenbackers and the Populists, government banking was deeply embedded in this political tradition. However, as the socialist movement grew in the first decade of the twentieth century, a former Populist vice presidential nominee, Thomas E. Watson, became one of socialism’s more vociferous critics. Many participants in the Populist uprising of the 1890s — most of whom were farmers — disagreed with Watson. They considered socialism to be a fuller development of their political philosophy. “I had the pleasure of voting for you in ’92,” a resident of upstate New York informed Watson, “and it is a matter of profound regret . . . that you cannot . . . step forward into the Socialist party.”19 Yet despite Watson’s denunciations of socialism, he promoted the idea of a federal bank that would make low-interest loans more widely available. It’s unsurprising then, given these two movements’ overlapping ideas, that in Oklahoma, Louisiana, and Texas, historian James R. Green found that “former radical Populists played an important role in building the early Socialist party locals.” Their political efforts proved highly successful, with one in six Oklahoma voters casting their ballots for Debs in the 1912 presidential election, an electoral result that rested on enthusiastic support from farmers.20
In 1912, the Socialist Party had put aside the ideological objections of some members and embraced farmers as fellow members of the working class.21 For workers, banking was an urgent political issue because the existing system’s instability ignited and fueled punishing economic depressions. Moreover, given that periodic hard times were a fact of life, those who managed to accumulate a nest egg wanted it to remain secure. In addition to these concerns, affordable credit was an especially pressing matter for farmers, since for them borrowing from lenders was analogous to the wage relationship between workers and employers. Credit allowed farmers to purchase essential supplies like seeds and fertilizer, and the agricultural loans that farming required typically imposed high and even usurious interest payments. Therefore, when socialists discussed banking, they spoke directly to a paramount concern of farmers. A leading socialist organizer in Oklahoma, Oscar Ameringer, stressed that “nationalization of the banking system, loaning money at actual cost, would give capital to the usury ridden farmer at a rate . . . lower than his greatest expectations.”22 The high cost of farm loans motivated supporters of the Bank of North Dakota — the sole state bank in the nation today — who persevered against opposition to its creation in 1919 and subsequently shielded the institution from attacks during its vulnerable early years.23
“The collective ownership and democratic management of the banking and currency system” became part of the Socialist Party platform in 1912.24 But government banking was much discussed and highly popular among working people well beyond party circles throughout the first half of the twentieth century. Postal banking was one form of government banking that received extensive public support. Numerous labor unions and farmer organizations lobbied to secure the 1911 establishment of the Postal Savings System, whose sole function was to offer savings accounts for small depositors. Shortly after the system’s inauguration, the 1912 American Federation of Labor convention sought to expand its role, resolving that funds deposited in the Postal Savings System should “be loaned to individuals . . . preferably to laboring people striving to obtain a home.” For decades, working people continued to urge that the Post Office Department become a full-fledged bank, offering checking accounts and low-interest loans through the nation’s extensive network of post offices.25
An additional legislative victory during this era that owed much to advocates of public banks involved farm lending. From the Populist movement forward, farmers had called repeatedly for the national government to provide them with affordable credit. Farmers frequently condemned bankers as superfluous and burdensome intermediaries who extracted unearned profit through interest payments. “Why not cut out this useless middle man, and the high rates of interest?” demanded one Nebraska farmer. In 1915, the Appeal to Reason spoke to this grievance, observing that under existing practices “the farmer suffers most” — even becoming “a debtor citizen” — and proposing to replace “private control of money and banking” with “absolute public control.” That summer, the nation’s three largest farmer organizations “unanimously agreed” on a plan that would create a federal government program for loaning money directly to farmers at low interest. The Federal Farm Loan Act of 1916 established an agricultural lending system that fell short of achieving the strictly governmental institution that many farmers favored. Still, this new system had access to funding from the United States Treasury and was governed by public officials. As farmers had predicted, the result was lower interest rates under more favorable terms.26
Producers and Parasites
Public banking proposals multiplied rapidly during the early years of the Great Depression, when one-fifth of the nation’s privately owned banks failed. In addition to difficult economic conditions, mismanagement and white-collar crime played significant roles in the banking crisis. In response to this financial disaster, the grassroots of the socialist movement pressed the case for government banks. “Captain Kidd in his most balmiest days would have gladly exchanged his piracy business for this ‘legitimate’ banking business,” one socialist declared in a letter to the editor. “The public ownership of all the banking institutions . . . is the only hope of the public for redemption from the present chaotic banking conditions that has helped paralyze this country.” Another correspondent implored the Milwaukee Leader “and all the other Socialist papers [to] print a form for a petition that the people could use to petition the government to establish government banks.” The Reading Labor Advocate did not promote such a petition drive but did urge that banking be “made a government function” as the “first step” toward replacing “the private profit system of industry.”27
The collapse of the private banking system in 1933 forced President Franklin D. Roosevelt to declare a national bank holiday immediately following his inauguration. The Socialist Party presented the new administration with a plan for transitioning to government banking. The Houston Post, a Democratic newspaper, predicted that recent events would make the nation especially receptive to socialist banking proposals.28 Yet given the extent to which the Depression undermined the standing of financial, business, and other orthodox economic authorities, the 1930s proved to be particularly frustrating for the movement. The Socialist Party’s emergence from World War I as a significantly reduced political force set the stage for this anticlimactic period. Socialist leader Norman Thomas perceptively observed that the New Deal undercut the party’s appeal, sarcastically remarking that Roosevelt carried out its program “on a stretcher.”29
Yet during the Depression, farmers and workers demanding government ownership and operation of banking embraced principles that socialists upheld, notably that existing economic arrangements awarded unaccountable private actors too much power, that the profit motive should not govern economic activity, and that the economy was a collective endeavor that ought to promote the common good. For example, New York City plunged into a fiscal crisis in the early 1930s, which empowered bankers to dictate budget policy as a condition for extending the loans that the city required to avoid default.30 Socialist leader Morris Hillquit recommended a municipal bank “as a protection against the domination of private bankers.”31 Appalled teachers in the public school system rallied to this cause, and their union denounced the banks for subverting fundamental democratic practice. In 1933, the American Federation of Teachers condemned the bankers’ “conspiracy to control government through their power to withhold credit,” resolving in favor of “a system of national banks under federal ownership and control.” The union had concluded that “only through government control of banking and credit can the manipulation of our financial structure for private ends be terminated.”32
Meanwhile, on the other side of the nation, the leading organization of small farmers in California — the State Grange — declared in its journal that banking “is not a producer of wealth — it is a middleman” and envisioned government banks that made affordable credit available on an equitable basis. Since banks were merely the intermediary between money and borrowers, these farmers believed it was necessary to remove the profit motive from banking by making “the government . . . the channel through which the cash and credit of the nation is made available to the people.” This arrangement would promote modest economic success, thereby supporting the financial security of citizens and sustaining the health of communities. Emphasizing that banking should not operate in the interest of profit extraction, the district grange of San Joaquin County insisted that “the service which money is designed to perform is that of a collective nature . . . private control of either the circulation of credit or the expansion of credit destroys the equitable feature of this service.” These Grangers accordingly “urge[d] a complete control of all monies by the government and the distribution of all monies through government agencies.”33
New Yorkers and Californians promoting the transformation of banking into a government function represented a prevalent opinion among working people nationwide. Support for nationalizing banking was expressed in multiple forms and in varied places, including through the state federations of labor of Colorado, Idaho, Indiana, Montana, Oklahoma, Oregon, and Washington; the state granges of California, Idaho, Missouri, Oregon, and Washington; and the state farmers’ unions of Iowa, Kansas, Missouri, and Montana.34 As late as World War II, the Minnesota State Federation of Labor wanted “private persons and corporations . . . forbidden to do a banking business . . . in order that value of money, of commodities, and of Labor power be stabilized and freed from the manipulations of speculators.” During the war, a union oil worker (and devoted advocate of government banking) echoed the venerable tradition of warning that “a few ruthless, cold-blooded, brutal private bankers have the power to bring on . . . continued economic chaos.”35
Although historians writing after the cultural turn often portray each glance, gesture, and utterance of marginalized individuals as consequential acts of resistance, a historical discrepancy exists between the prevalence of grievances among working people and the comparative infrequency of political action on their part.36 In order to produce effective action, a sense of injury requires a cogent interpretation of its causes. Workers and farmers who studied banking issues regularly concluded that bankers were parasites who profited from the labor of producers. This understanding encouraged working people to believe that their labor entitled them to both a fair share of what the economy produced and greater control over economic institutions themselves. After all, even though bankers performed no productive service, the existing banking system imposed these superfluous middlemen — exploitative figures who used the money that depositors had earned to extract undeserved income from borrowers.
The sharp juxtaposition of productive labor and unproductive finance yielded a producerist analysis that promoted a sense of solidarity among working people. Producerism holds that honest work creates wealth; hence producers should receive the fruits of their labor, not idle parasites. “What do the bankers produce that they can live on the fat of the land while we who produce everything have almost nothing of what we produce?” asked one Californian during the Depression.37 This perspective expressed a stark perception of opposing economic interests — a form of class division that inspired political action. Workers and farmers who considered themselves contributors to the commonweal shared a sense of exploitation at the hands of these nonproducers. Producerist convictions inspired working people to imagine banking alternatives that would rectify existing injustices and elevate the common good. Discontent with the private banking system promoted the idea that government banking could make the economy more responsive to democratic principles. This insight advanced a sense of the possible that motivated activist workers and farmers to campaign for public banks through their membership organizations.
Of course, in spite of the strength of public support for government banking, private banking remains the default model in the United States. When the banks collapsed in 1933, President Roosevelt was compelled to impose federal control over the entire system. The prestige of bankers was badly tarnished, and banks were not functioning. “It ought to be accepted as a principle,” Norman Thomas argued, “that banks saved only by government action . . . should pass absolutely into the control of the government and not be returned to the owners who could not manage them.”38 But in this moment of crisis, Roosevelt made the expedient decision to resurrect the private banking system. One supporter of the socialization of banking with contacts inside the administration reported that “the money changers whom Mr. Roosevelt drove out of the temples in his inaugural [are] congregating in the White House and telling him what to do.” The leading administration official during the crafting and execution of the bank holiday later observed that “capitalism was saved in eight days.”39
The ability of the private banking system to survive this trial shows how firmly entrenched its power was. But the extent of this power also makes clear both how audacious the grassroots banking politics campaign was and how remarkable its achievements were. The hostile opposition of bankers, for example, could not prevent the establishment of a government bank that extended throughout the nation: the Postal Savings System, often referred to as “Uncle Sam’s Savings Bank.” Rather than deter champions of government banking, awareness of the strength of their opponents actually motivated populist advocacy. “Do not get it into your heads brother farmers that these well fed bankers are going to let you get away from their crib if they can help it,” stressed Grange leader Carey B. Kegley. “The picking is entirely too good for them ever to permit you to be relieved from paying tribute.” Proponents of postal banking maintained their efforts to extend the institution following its establishment. Kegley, for example, proposed lending its funds to farmers at low interest.40 The possibility of comprehensive postal banking remained a threatening prospect to bankers until waning public interest in financial questions allowed them to lobby successfully for the Postal Savings System’s termination in 1966.
From today’s vantage point, it’s remarkable how frequently bankers were forced on the political defensive during the first half of the twentieth century. The relative ease with which bankers have promoted their desired deregulatory agenda and extracted government bailouts in recent decades underlines this point. “The banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill,” stated Senator Richard J. Durbin during the 2007–8 financial crisis. “And they frankly own the place.”41
The achievements of banking politics in its heyday were possible because of the vibrancy of the era’s worker and farmer organizations. Institutions that working people created and maintained served as schoolhouses where members discussed and debated financial issues. These autonomous spaces were relatively free of the economic orthodoxies that were used to defend established power relations. Within this sphere, bankers lacked authority and standing, which fostered an oppositional politics that — unlike the society at large — did not defer to the private banking system and its allies. Through participation in this populist political culture, workers and farmers became more fully conscious of the extent to which their own interests were at odds with the existing banking and monetary system, and consequently freer to formulate their own visions for what that system should become. Additionally, labor unions and farmer organizations provided working people with a collective voice that amplified their influence inside policymaking circles. This institutional framework allowed working people to challenge the prerogatives of bankers.
Sanders 2016 and Afterward
The economy and resulting social structure that made possible early twentieth-century banking politics has passed into history. The small farmers who were central to this politics are much diminished in number, and the labor movement has been in retreat for decades. But the inherent economic dynamic that generated mass interest in banking questions remains relevant today. In important respects, the relationship between the public and the current banking system resembles the situation that gave rise to grassroots banking politics over a century ago. Large numbers of Americans increasingly contend with burdensome debts as a regular feature of their lives. And the banking structure has become more unstable in recent decades, producing the savings and loan crisis of the 1980s, the financial crisis of 2007–8, and the spate of failures among large so-called “regional” banks in 2023. Stimulating a renewed interest in banking politics, as Sanders did, could create pressure for vital changes in American society today.
In his 2016 presidential campaign, Sanders achieved a significant breakthrough: reintroducing politics rooted in class analysis to the national scene. One of his main themes on the campaign trail was the threat that banks — and especially the large banks of Wall Street — posed to working families. Sanders demonstrated that banking could again become an issue that mobilizes voters. He described “an economy and a political system that has been rigged by Wall Street to benefit the wealthiest . . . at the expense of everyone else.” Too-big-to-fail banks and pervasive white-collar crime, Sanders argued, define the nation’s banking system, abetted by a regulatory regime that “has been hijacked by the very bankers it is in charge of regulating.” He promised a dramatic departure from existing policies if elected. “Big banks will not be too big to fail,” Sanders pledged. “Big bankers will not be too big to jail.”42
Although a democratic socialist, Sanders did not advance the nationalization of banking as the solution. The political culture of banking politics that made such proposals so common in the past had faded away decades earlier. Still, Sanders promised a true break from the status quo that included reviving postal banking, which would have “an important role in providing modest types of banking service to folks who need it.” Furthermore, Sanders made Clinton defend her affiliation with Wall Street, demonstrating that for many voters such connections with the financial sector had become a political liability. The populist analysis of the banking system that Sanders articulated echoed criticisms that were heard widely in the early twentieth century. “A handful of people on Wall Street,” he observed, “have extraordinary power over the economic and political life of our country.” But the most striking link to the past was how Sanders proposed to do something about this undue influence. “When millions of working families stand together, demanding fundamental changes in our financial system,” he observed, “we have the power to bring about . . . change.”43
Socialism received a major boost from the Sanders campaign, but today’s socialism isn’t the working-class movement of the early twentieth century. Among members of the nation’s largest socialist organization, the Democratic Socialists of America, a 2021 survey found that more than 80 percent had a college degree and 35 percent had an advanced degree.44 But when Sanders talked about banking, he reached a different audience. A key strength of Sanders’s 2016 candidacy was the clarity of his class-based message. By addressing banking, Sanders communicated a commitment to advancing the material interests of working people. Placing discussions about banks, bankers, Wall Street, and the Federal Reserve at the center of his campaign allied Sanders with struggling workers — those harmed by financialization, deindustrialization, corporate outsourcing, foreign-trade agreements, and the other economic reconfigurations that have disadvantaged workers. His depiction of finance offered structural clarity and presented specific reforms without becoming overly technical. Rebuilding working-class institutions and political power requires this type of compelling analysis of issues that are relevant to the everyday lives of citizens.
Consumer banking services are fundamental to daily life. At publicly accountable government banks, working people would benefit materially from consumer services that are not grounded in profit extraction. At public institutions, the profit motive wouldn’t inspire administrators to shave expenses and inflate revenues by increasingly monetizing, minimizing, and even eliminating functions that depositors and borrowers value — a never-ending push within the private banking system.45 The agenda of officials wouldn’t revolve around levying high interest payments, imposing large fees, inventing entirely new fees, automating customer service jobs, closing branch offices, and devising various strategies to reduce services and nickel-and-dime consumers. Instead of commodifying personal financial information, public banks could offer privacy protections. Credit unions represent a notably successful example of cooperative enterprise in the United States because they provide their members an attractive alternative to for-profit banks. Government banking would attract patronage and win public support for the same reason.
Government banking could have a salutary macroeconomic function, offering countercyclical support when economic conditions worsen. Stepped-up lending during such periods could reinforce other fiscal and monetary responses, including jobs guarantee programs. At the state and local levels, government banks could brace sagging budgets amid tax-revenue declines. The funds of government banks could create opportunities to extend concrete gains to working people in normal economic times as well. The following discussion suggests some ways that government bank assets could be used to benefit working people in their everyday lives.
Austerity policies have diminished numerous public goods, but government banking could provide affordable opportunities for financing a diversity of job-creating public works projects at the federal, state, county, and municipal levels. Instead of confronting burdensome interest payments through the typical array of private lenders and bondholders, government agencies could borrow funds at more attractive terms, making possible projects that would otherwise be deemed unviable.
The nation’s public spaces are too often poorly maintained and even crumbling. Educational facilities such as schools and libraries, in addition to more specialized structures like museums and planetariums, could be constructed and renovated using financing provided by government banks. Buildings that serve the public, from municipal hospitals and clinics to community centers and post offices, could be transformed from blueprints into bricks and mortar. New and improved recreational spaces, including parks, playgrounds, swimming pools, tracks, baseball and softball diamonds, and basketball and tennis courts, could be another outcome of such financing. Cash-strapped public transit and other infrastructure systems struggling to make needed improvements and repairs could also benefit. The Tennessee Valley Authority stands as a legacy of the New Deal and evidence of what government infrastructure initiatives can accomplish.46 Government banks could finance infrastructure projects involving transportation, energy, water, communications, and other sectors from the local to national levels.
Affordable housing is a pressing issue throughout the nation. Increasing numbers of working-class residents of both major cities and rural areas are finding it difficult to maintain a stable housing situation. Fiscal constraints are an obstacle to otherwise workable government-owned and rent-regulated solutions. While private investors avoid housing projects that don’t promise high returns, government banks could fill that void by financing social housing programs, ones that need not repeat the mistake of mid-twentieth-century public housing projects of limiting eligibility to lower-income residents. Shoddily constructed, poorly maintained, loosely managed projects intended only for very low-income residents were a recipe for failure. This unfortunate precedent supports not being so exclusive in the future. Many people in middle-income brackets would welcome the opportunity to participate in quality, well-managed social housing programs.47
Using the financial power of government banks to save jobs would forge a critical connection between these institutions and the lives of workers. In response to the deindustrialization that devastated numerous communities during the 1970s and 1980s, a movement emerged among workers to acquire and operate discarded manufacturing facilities. In 1987, the historian and labor activist Staughton Lynd observed that such ideas “have made something akin to socialism acceptable to middle American working people.”48 However, in order to be viable, this concept requires workers and their allies to secure large sums of money. Under the private banking regime, lack of the necessary financing for such endeavors has impeded this strategy. Although the wave of intense disinvestment that created the Rust Belt has passed, corporate abandonment has continued.49 Government banking could alter the calculus when workers face job losses.
Government banking presents opportunities for a host of public policy options, serving as a stimulus for potential government solutions to existing social problems. Objections on financial grounds frequently halt proposals for new and expanded public services and projects. The pool of funds in government banks would loosen this restraint. In this way, government banking could combat public resignation to the status quo. While it would remain necessary to set policy priorities, ideas once dismissed as unrealistic would be deemed worthy of further consideration. Proposals that previously appeared unrealizable would look more attainable. It would become easier to imagine viable social change. The basis of political life would move toward possibilities.
During the first half of the twentieth century, millions of Americans supported government control of banking in a nation where socialist principles supposedly lacked appeal. They wanted the economy to operate in the service of the workers and farmers whose labor underwrote national prosperity, and they believed that realizing this populist vision required a banking system oriented toward public service instead of private profit. Although most advocates of government banking did not identify as socialists, they were sympathetic to the socialist ideal of democratizing the economy. The recent rise of Bernie Sanders in national politics reveals latent support for socialist ideas among working-class voters, including the white working class, who are frequently dismissed as innately reactionary.50 The history of banking politics in the United States is a striking reminder of what organized working people can achieve. Similar financial grievances circulate among the American working class today, serving as a potential source of popular political action in the future.
Notes.
1. Bernie Sanders, “Remarks on Wall Street and the Economy in New York City,” American Presidency Project, January 5, 2016. The people who figure in this article tended to switch between such terms as “Wall Street” and “bankers” when referring to those who had financial power. Their analyses, however, were drawn primarily from the actions of banks and bankers, which are the terms I favor in this article.
2 Kirsten Powers, “Hillary’s Bernie Problem: Pie-in-the-Sky Sanders,” USA Today, February 16, 2016.
3 For millions without bank accounts, the absence of banking services is a relevant matter.
4 Jared Abbott et al., Commonsense Solidarity: How a Working-Class Coalition Can Be Built, and Maintained (Brooklyn, NY: Jacobin, Center for Working-Class Politics, YouGov, 2021); Matt T. Huber, “Still No Shortcuts for Climate Change,” Catalyst 4, no. 4 (2021).
5 From Businesses and Banks to Colleges and Churches: Americans’ Views of U.S. Institutions (Washington, DC: Pew Research Center, 2024).
6 Philip Bump, “Shock Poll: Everyone Hates Wall Street,” Washington Post, June 30, 2016.
7 R. Thomas Herman, “Many Think Selfishness, Greed Are Widespread on Wall Street,” Wall Street Journal, October 18, 1996.
8 The American Appetite for Government (Washington, DC: American Compass, 2024).
9 Michael Schroeder, “Mesta Plans More Pay,” Pittsburgh Post-Gazette, October 11, 1983; R. Lee Hotz, “Coalition’s Muscle Keeps City Nabisco Plant Open,” Pittsburgh Press, December 22, 1982.
10 Frederick A. Barkey, Working Class Radicals: The Socialist Party in West Virginia, 1898–1920 (Morgantown: West Virginia University Press, 2012); Richard W. Judd, Socialist Cities: Municipal Politics and the Grass Roots of American Socialism (Albany: State University of New York Press, 1989); Donald T. Critchlow, ed., Socialism in the Heartland: The Midwestern Experience, 1900–1925 (Notre Dame, IN: University of Notre Dame Press, 1986); James R. Green, Grass-Roots Socialism: Radical Movements in the Southwest, 1895–1943 (Baton Rouge: Louisiana State University Press, 1978).
11 Christopher W. Shaw, Money, Power, and the People: The American Struggle to Make Banking Democratic (Chicago: University of Chicago Press, 2019).
12 Herbert M. Bratter, “The Committee for the Nation: A Case History in Monetary Propaganda,” Journal of Political Economy 49, no. 4 (1941); Scott Beekman, William Dudley Pelley: A Life in Right-Wing Extremism and Occult (Syracuse: Syracuse University Press, 2005), 83–93.
13 This commonly held interpretation corresponds with Karl Marx, Capital, vol. 3, ed. Frederick Engels (New York: International Publishers, 1967),544–45.
14 William C. Pratt, “The Reading Socialist Experience: A Study of Working Class Politics” (Ph.D. diss., Emory University, 1969); Henry G. Stetler, The Socialist Movement in Reading, Pennsylvania, 1896–1936 (Storrs: University of Connecticut, 1943).
15 James H. Maurer, It Can Be Done (New York: Rand School Press, 1938), 90.
16 Maurer, It Can Be Done, 90, 110.
17 United Mine Workers of America, Proceedings of the Nineteenth Annual Convention (Indianapolis: Cheltenham Press, 1908), 235.
18 “The Banker Knows,” Appeal to Reason, January 25, 1908.
19 “Letters From the People,” Watson’s Magazine, April 1906.
20 Green, Grass-Roots Socialism, 27, 29, 244–52.
21 John Spargo, ed., National Convention of the Socialist Party, 1912 (Chicago: Socialist Party, 1912), 192–93; Lawrence C. Goodwyn, “The Cooperative Commonwealth and Other Abstractions: In Search of a Democratic Promise,” Marxist Perspectives 3, no. 2 (1980): 20–22; Donald B. Marti, “Answering the Agrarian Question: Socialists, Farmers, and Algie Martin Simons,” Agricultural History 65, no. 3 (1991).
22 Oscar Ameringer, Socialism for the Farmer (St Louis: National Rip-Saw Publishing Co., 1912), 28.
23 Michael J. Lansing, Insurgent Democracy: The Nonpartisan League in North American Politics (Chicago: University of Chicago Press, 2015), 97–99, 147–49, 153, 232–34; Alvin S. Tostlebe, “The Bank of North Dakota: An Experiment in Agrarian Banking” (Ph.D. diss., Columbia University, 1924), 123–62.
24 Spargo, National Convention of the Socialist Party, 197.
25 American Federation of Labor, Report of Proceedings of the Thirty-Second Annual Convention (Washington, DC: Law Reporter Printing Company, 1912), 379; Christopher W. Shaw, “‘Banks of the People’: The Life and Death of the U.S. Postal Savings System,” Journal of Social History 52, no. 1 (2018).
26 “Bankers Have Bound the Farmers Hand and Foot,” Appeal to Reason,February 27, 1915; Christopher W. Shaw, “‘Tired of Being Exploited’: The Grassroots Origin of the Federal Farm Loan Act of 1916,” Agricultural History 92, no. 4 (2018).
27 “The Banking Pirates,” New Leader, November 21, 1931; “Banking,” Milwaukee Leader, February 17, 1933; “When Will the Banks Open?” Reading Labor Advocate, March 17, 1933.
28 Robert S. McElvaine, The Great Depression: America, 1929–1941 (New York: Times Books, 1984), 136–42; Shaw, Money, Power, and the People, 183.
29 John Kenneth Galbraith, The Great Crash, 1929 (Boston: Houghton Mifflin Company, 1988), 114–15; Herman E. Krooss, Executive Opinion: What Business Leaders Said and Thought on Economic Issues, 1920s–1960s (Garden City, NY: Doubleday & Company, 1970), 20–21; Arthur Mann, “Socialism: Lost Cause in American History,” Criterion 19, no. 3 (1980); W. A. Swanberg, Norman Thomas: The Last Idealist (New York: Charles Scribner’s Sons, 1976), 204.
30 Cynthia Horan, “Agreeing with the Bankers: New York City’s Depression Financial Crisis,” Research in Political Economy 8 (1985).
31 “Hillquit Proposes a Municipal Bank,” New York Times, October 20, 1932.
32 American Federation of Teachers, Proceedings, Seventeenth Annual Convention (n.p., 1933), 462; American Teacher 17, no. 1 (1932): 27.
33 “State Owned Banks May Solve Problem,” California Grange News, July 1934.
34 Shaw, Money, Power, and the People, 183, 206–7, 230, 259, 269.
35 Minnesota State Federation of Labor, Proceedings of the Sixty-Third Convention (St Paul, MN: The Federation, 1945), 112; Oil Workers International Union, Proceedings, Fourteenth National Convention (Fort Worth, TX: OWIU, 1943), 201.
36 E. P. Thompson, “The Crime of Anonymity,” in Albion’s Fatal Tree: Crime and Society in Eighteenth-Century England, Douglas C. Hay et al.(New York: Pantheon Books, 1975), 304–8; Vivek Chibber, The Class Matrix: Social Theory after the Cultural Turn (Cambridge, MA: Harvard University Press, 2022), 106–10.
37 Shaw, Money, Power, and the People, 24–26, 267.
38 Norman Thomas, “Timely Topics,” New Leader, March 11, 1933.
39 Ernest H. Gruening to Norman Thomas, March 9, 1933, reel 1, Norman Thomas Papers, New York Public Library; Rexford G. Tugwell, In Search of Roosevelt (Cambridge, MA: Harvard University Press, 1972), 272; Raymond C. Moley, After Seven Years (New York: Harper & Brothers Publishers, 1939), 155.
40 Washington State Grange, Proceedings of the Twenty-Fifth Annual Session (Olympia, WA: Recorder Press, 1913), 37.
41 Robert Weissman and Joan Claybrook, The Corporate Sabotage of America’s Future and What We Can Do About It (Washington, DC: Essential Books, 2023), 33.
42 Sanders, “Remarks on Wall Street.” See also Bernie Sanders, Our Revolution: A Future to Believe In (New York: St Martin’s Press, 2016), 296–317.
43 Sanders, “Remarks on Wall Street”; “Why Bernie Sanders Wants Post Offices to Offer Banking,” Scripps News, October 29, 2015.
44 DSA Growth and Development Committee, DSA Member Survey Report, 2021 (n.p., 2021).
45 Ralph Nader, In Pursuit of Justice: Collected Writings, 2000–2003 (New York: Seven Stories Press, 2004), 208, 236–37, 371–73, 399–401; Bob Sullivan, Gotcha Capitalism: How Hidden Fees Rip You Off Every Day — and What You Can Do About It (New York: Ballantine Books, 2007), 57–69.
46 Robert D. Leighninger Jr, Long-Range Public Investment: The Forgotten Legacy of the New Deal (Columbia: University of South Carolina Press, 2007), 102–17.
47 Nicholas Dagen Bloom, Public Housing That Worked: New York in the Twentieth Century (Philadelphia: University of Pennsylvania Press, 2008); Joshua B. Freeman, Working-Class New York: Life and Labor Since World War II (New York: New Press, 2000), 105–24.
48 Barry Bluestone and Bennett Harrison, The Deindustrialization of America: Plant Closings, Community Abandonment, and the Dismantling of Basic Industry (New York: Basic Books, 1982); Mike Stout, “Eminent Domain and Bank Boycotts: The Tri-State Strategy in Pittsburgh,” Labor Research Review 1, no. 3 (1983); Staughton Lynd, “The Genesis of the Idea of a Community Right to Industrial Property in Youngstown and Pittsburgh, 1977–1987,” Journal of American History 74, no. 3 (1987).
49 John Russo and Sherry Lee Linkon, “The Social Costs of Deindustrialization,” in Manufacturing a Better Future for America,ed. Richard A. McCormack (Washington, DC: Alliance for American Manufacturing, 2009).
50 J. C. Gillies, “‘Feel the Bern’: Marketing Bernie Sanders and Democratic Socialism to Primary Voters,” in Political Marketing in the 2016 U.S. Presidential Election, ed. J. C. Gillies (Cham, Switz.: Palgrave Macmillan, 2017); E. S. Fertik, “The New Political Arithmetic: Who Voted for Bernie, Who Voted for Hillary, and Why,” New Labor Forum 25, no. 3 (2016).
Christopher W. Shaw is the author of Money, Power, and the People: The American Struggle to Make Banking Democratic and First Class: The U.S. Postal Service, Democracy, and the Corporate Threat.
As a lonely critic who dared to challenge Federal Reserve Board chairman Alan Greenspan during the stock market mania of the late 1990s, then congressman Bernie Sanders received recognition from the political left and dismissive coverage from the mainstream media. Sanders subsequently won significant national attention as an outspoken populist critic of the banking system in the wake of the 2007–8 financial crisis. After declaring his presidential candidacy in 2015, he cemented this reputation as the nation’s preeminent critic of bankers, using the campaign to express the anger that many Americans shared about the financial crisis and the resulting bailout. “If elected president,” Sanders pledged, “I will rein in Wall Street so they can’t crash our economy again.”1 Hillary Clinton conceded the appeal of this campaign promise when — panicked by the popularity of Sanders’s attack on finance and unable to respond effectively to his criticisms — she sought to change the subject by exclaiming, “If we broke up the big banks tomorrow . . . would that end racism? Would that end sexism? Would that end discrimination against the LGBT community?”2 The stand that Sanders took against the banks was compelling, true to the contemporary moment, and appeared novel. But although unfamiliar to the times, opposing the excesses and power of bankers was hardly original. Sanders emerged as the successor to an influential strand of American political culture with deep historical roots that has motivated far-reaching economic demands in the past and could do so again in the future.
As the Sanders campaign demonstrated, while banking is widely considered to be dry and dull, it’s nevertheless an issue that can energize working-class politics. Discussing and debating banking calls attention to opposing material interests, which promotes a politics that is attuned to questions of class. Workers confront the relevance of banking to their daily lives every time they check their account balance or pay a bill.3 When Sanders presented financial policy as a clash between Wall Street on the one hand and “working families” on the other, he articulated a class-based populist message that could reach a diverse spectrum of working-class voters. In the past few years, local single-issue groups promoting public banks made real headway in several heavily Democratic cities and states. Among other issues, their campaigns foregrounded green energy projects and unequal credit access due to racial discrimination. This messaging excites liberal Democratic politicians, but its capacity to forge broader coalitions and inspire the solidarity that sustains working-class politics is more limited.4
A look at the past reveals that banking programs that are framed in universal terms can offer an effective organizing device with widespread appeal. Shared commitments to remaking the banking system were the cornerstone of an influential American political tradition. In the late nineteenth century, the “money question” galvanized two mass political parties that protested Gilded Age inequality, the Greenback and Populist parties. In the early twentieth century, large numbers of workers and farmers across the nation rallied around banking reforms as a means to make American society more democratic. Seen in the light of this history, the promise of material benefits from government banking continues to present a source for working-class political mobilization today.
Recent polling indicates that the public is dissatisfied with the private banking system. In 2024, the Pew Research Center revealed that 60 percent of Americans think that banks have a negative effect on the nation. This discontent with the current banking system is bipartisan: Democrats and Republicans were equally likely to view banks as having a negative impact.5 Such an outlook conformed with the findings of earlier surveys. A 2016 poll by Edison Research found that a majority thought Wall Street — a term commonly used for large banks — did more to hurt than to help the lives of Americans, an opinion that prevailed across racial, gender, educational, and partisan lines, with one exception. The only group that bucked this pattern were those with postgraduate educations, though here, too, a plurality thought Wall Street did more harm than good.6 And these poll results aren’t a post–financial crisis phenomenon. When Louis Harris and Associates conducted polling on the subject in 1996, amid an economic boom, the firm’s chairman concluded that the public’s impression of Wall Street was “awful.” In the survey, 61 percent of Americans agreed that Wall Street was “dominated by greed and selfishness” and 64 percent agreed that “most people on Wall Street would be willing to break the law if they believed they could make a lot of money and get away with it.”7
Government banking could open up new economic possibilities. Absent the imperative to maximize profits, public banks from the local to the federal level could help advance social democratic policies. Operating under the mandate to promote social welfare, such banks could help finance universal government programs. Public infrastructure projects would be prime candidates for these loans. Importantly, government banking would bolster public control over capital flows. Increasing funding opportunities for social goods and government services would invigorate the public sector. Government banking could allow for greater public management of capital allocation among different economic sectors and make investment decisions more democratically responsive.
Securing these results would demand that the administration of government banks be organized around public transparency and accountability. Publicly appointed and elected governing committees would help hold decision-makers responsible to voters. Fostering interaction between government banking officials and the people their decisions affect would promote the leadership’s concern for social needs and public opinions. Requiring officials to consult regularly with the full spectrum of social stakeholders through advisory councils and open meetings would offer a means of institutionalizing such connections. Placing officials under regular oversight and review by elected legislatures would further promote democratic responsiveness.
Opponents of government programs habitually claim that Americans are inherently opposed to government programs. Yet voices on the political right are among those questioning this cliché. In a 2024 survey, American Compass, an organization that advocates a “new conservative economic agenda,” found “vanishingly little support across parties for reducing any of government’s major roles.” Under one-fifth of those polled thought government programs were “usually unhelpful,” while the majority were open-minded on the subject, stating that they “don’t believe a general rule of thumb [on government’s role] makes sense.”8 This undoctrinaire verdict indicates that most Americans can be receptive to the merits of government programs — an attitude that has historical precedent in the United States. The twentieth century witnessed the New Deal, President Lyndon B. Johnson’s Great Society, a slew of reforms during President Richard Nixon’s administration, and numerous other government initiatives. More recently, right-wing opponents of health care reform fervidly attacked the Affordable Care Act and framed it as emblematic of “big government.” During the past decade, this law has gained steadily in public acceptance, and all but ten states — mostly in the South — have adopted the program’s Medicaid expansion.
Banking for the People
Though bankers might seem omnipotent, the nature of banking makes the entire sector susceptible to public pressure. The very mechanics of banking yield major vulnerabilities to negative popular opinion: there is always the risk of depositors withdrawing their money and closing their accounts. In the early 1980s, boycotts targeting banks proved an effective tool for activists defying deindustrialization in western Pennsylvania. In one instance, such a boycott helped protect thousands of workers’ pensions and severance pay. In another, a threatened boycott reversed plans to shutter a plant employing 650 workers.9 Strategically more significant is the leverage that the public has over banking in the political realm. While the political influence of bankers is well known, their need to pursue self-protection through political involvement is less noted. Banks are reliant on government, particularly the national government. The private banking system is both a relatively regulated branch of the economy and favored with the privilege of a federal safety net, which is integral to its existence. The banking system depends on confidence rooted in continuing support from the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve System, and ultimately the federal government itself. The current power of bankers is less a structural matter of course than the consequence of an absence of political challenges.
During the early twentieth century, the private banking system faced significant grassroots criticism. Keen public interest in financial questions reflected the political inheritance of Greenbackism and Populism. Influenced by these traditions, and also by the rising socialist movement, many Americans looked forward to establishing government banks.
Discussion of the subject of government banking evokes an enduring line of historical inquiry: “Why is there no socialism in the United States?” Over the years, numerous explanations have been offered to this question, including racial and ethnic animosities, high levels of social mobility, an entrenched two-party system, and an intensely individualistic culture. More recently, historians writing in the latter part of the twentieth century interrogated the premise of this question itself, revealing that socialism not only existed in the United States but had roots in the American heartland. Their research situated small Midwestern cities of the Progressive Era, the countryside of Oklahoma during the same period, and the nineteenth-century Indiana milieu that produced Eugene V. Debs at the center of the nation’s socialist history.10 When historians recovered the socialist past of the early twentieth-century United States, they also resurrected the memory of the movement’s substantial appeal to workers and farmers. In 1920, Debs famously received close to one million votes for president while imprisoned at the Atlanta Federal Penitentiary due to his opposition to World War I.
Yet an important dimension of the question of socialism’s appeal remains comparatively neglected: the prevalence and popularity, beyond the Socialist Party of America, of economic ideas that intersect and overlap with socialism. In this article, I will explore an aspect of the American past that has been lost: a mass movement of working people who sought to socialize banking. During the first half of the twentieth century, widespread public condemnation of the private banking system and the bankers who controlled this fundamental feature of capitalism led to broad support among working people for creating government banks and nationalizing privately owned ones.11
The appeal of government banking to early twentieth-century Americans resulted from a remarkable level of popular engagement with financial policy questions, one largely absent today. Material concerns drove these workers and farmers to push for a banking reformation that would make the economy more equitable. Such critics of the banking and monetary status quo thought broadly about economic matters. But there was a smaller, less influential group whose interest in money was narrower. An exclusive focus on financial affairs led these critics to believe that the only necessary economic change involved tinkering with money. Among these were establishment figures whose attempt to use monetary reform to forestall other economic reforms reveals the reactionary motivations behind such programs. During the Great Depression, for example, one conspicuous lobby for inflation — the Committee for the Nation — was an organization of business executives who opposed the New Deal. There were also politically and socially marginal reactionaries, typically of an antisemitic variety, whose conspiracy theories incorporated financial nostrums. The political program of the 1930s protofascist group the Silver Shirts, for instance, addressed monetary matters. A distinguishing feature of their program was the doubtful proposition that replacing physical currency with a network of checking accounts would eliminate “money crimes” like robbery and the extortion of ransom through kidnapping.12
While groups such as the Committee for the Nation and the Silver Shirts attempted to turn mass involvement with financial questions to their own ends, elite-orchestrated and fringe political programs unfolded apart from the grassroots banking politics of working people. Truly populist banking politics, by contrast, was rooted in labor unions and farmer groups, institutions that working people organized, led, and funded themselves. Numerous worker and farmer institutions, from the local to the national levels — ranging from the Chicago Federation of Labor to the National Farmers Union and the United Mine Workers of America — provided forums where heterodox financial ideas circulated, including the belief that establishing government banks would combat the abuses of the existing financial system as a whole.
On an individual level, working people were interested in banking because they wanted safety for their savings and greater access to credit. The motive here was less about becoming rich than about attaining the modest prosperity that would offer basic financial security to them and their families. They also hoped to overcome the economic, political, and social threat posed by the concentration of vast financial power in only a few hands. Opponents of the “money power” endeavored to tame it for the sake of democracy. Working people understood Wall Street to be the headquarters of capitalism, autonomously deciding where investment would and would not be channeled. They believed that the profit-seeking excesses of large, unaccountable financial institutions frequently threatened economic stability.13 Accordingly, on this front as well, working people’s quest for financial security made reforming the banking system a priority for them, because they understood that, operating with minimal oversight, banks both caused and magnified the recurring depressions that regularly wreaked havoc in the nineteenth and early twentieth centuries.
The collective political action that emerged from policy discussions within organizations of workers and farmers drove significant changes to the banking system from the 1910s through the 1930s. A major impetus for most of the era’s banking reforms was persistent public pressure, consistently expressed through elected officials, for more government involvement in this critical sector of the economy. In comparison with today, the banking system operated more autonomously from government, stamping this reform agenda as a clear break with past practice. Still, the vigor of popular involvement in grassroots banking politics produced victories despite the burden of precedent and the banking fraternity’s bitter resistance. The possibility of government enterprise in the form of public banks presented a sweeping policy option that loomed over all contemporary financial debates. The threat of such a radical step eased reforms that now appear moderate but were opposed adamantly by bankers at the time, who attacked the FDIC, Farm Credit System, and now defunct Postal Savings System. Contrary to their fears, following its establishment in 1934, the FDIC brought unprecedented stability to the banking system. It was the keystone of a reformed financial order that no longer fueled sharp booms and busts, providing a foundation for post–World War II mass prosperity and neutralizing future demands for far-reaching changes to banking.
Historical accounts of mass engagement with financial politics in the modern society that emerged between the Civil War and World War II have emphasized monetary debates, especially the 1890s conflict over the currency that arrayed the gold standard against bimetallism (basing money on both gold and silver). But grassroots banking politics in the early twentieth century was less focused on how money ought to be defined than on the purpose of financial institutions. Making finance accountable to the material and moral concerns of working people was at the heart of this mass movement. Its supporters believed that stripping the control of money and credit from bankers would end the profit motive’s power not only over individuals but also over investment decisions that shaped larger economic developments. The idea of organizing banking to serve working people — instead of exploiting them — mobilized workers and farmers, who pursued a populist economic vision that aligned with socialist ideals. In his 2016 campaign, Sanders revealed that financial reform can still motivate working-class voters today.
Greenbackers, Populists and Socialists
The 1928 and 1932 Socialist Party vice presidential nominee James H. Maurer entered politics through his involvement in financial reform. His political activism was pivotal to the development of the strong socialist movement in Reading, Pennsylvania, that peaked in the late 1920s.14 Socialism in the city was rooted among its largely Pennsylvania Dutch working class — a background that Maurer shared. Overcoming poverty and illiteracy, he forged an alliance between organized labor and socialism in his hometown, eventually becoming president of the Pennsylvania State Federation of Labor. A newsboy at six years old and a factory laborer at ten, at sixteen Maurer was an illiterate apprentice in a machine shop. But his life changed forever thanks to a politically active machinist who taught him how to read. Under this fellow worker’s tutelage, Maurer embarked upon an intensive program of self-education on the topics of “banking, the gold standard, bimetallism, paper money, inflated currency, contracted currency, free coinage of silver.”15 He had become one of many working-class students of finance during the late nineteenth and early twentieth centuries.
Learning about financial issues was an empowering experience for Maurer. “Before I was seventeen,” he recalled, “I believed I knew more about banking and the manipulation of money than most Congressmen did.” Although too young to vote, Maurer became an enthusiastic member of the Greenback Party. Greenbackers wanted the federal government to combat the frequent economic depressions and ruinous deflation of the late nineteenth century by printing large amounts of paper currency. Through his involvement with the Greenback Party, Maurer learned the mechanics of political organizing, carrying the flag in the party’s parades, distributing its literature, and generally doing whatever work needed to be done. By the 1890s, the Greenback Party was moribund, but its financial ideas had a new home in the growing Populist movement — a mass protest against laissez-faire capitalism that won adherents among Midwestern wheat farmers and Southern cotton farmers, Western miners and urban construction workers. Maurer found himself in great demand as a speaker at Populist events throughout Pennsylvania. “Bankers particularly came in for scathing abuse,” he recalled. “We handled them without gloves.”16
The banker was a figure who represented unearned wealth and unaccountable power. Casting a critical eye on the riches that bankers enjoyed and the undue influence they exercised helped contemporaries think in more systemic ways about the unfairness of economic arrangements that privileged some and disadvantaged others. The Panic of 1907, for example, was caused by a reckless and bungled attempt to corner a mining stock and the ensuing failure of banks connected with the unsuccessful speculators. The federal government hurried to rescue shaky banks with a sizable no-interest loan. Meanwhile, the economic depression that this financial crisis caused threw millions of workers out of their jobs. A socialist member of the United Mine Workers of America blamed the depression on the “instability of our present banking system . . . augmented by . . . stock gamblers and money sharks, beside whom a common horse-thief or safe-breaker would be a respectable citizen.”17
In the aftermath of the 1907 crisis, the largest-circulation socialist newspaper in the nation, the Appeal to Reason of Girard, Kansas, used banking to dramatize the disparate nature of government involvement in the economy. “What is a banker to do in a financial crisis if he is out of cash?” the newspaper asked. “Come to the United States treasury and help yourself to government money.” The federal response, the Appeal observed, was entirely different in the case of unemployed workers. “What is a man to do who is out of work in a financial crisis and is starving? God knows!”18 The privileges that bankers enjoyed provided the Appeal with an instructive case study of how, despite criticisms of socialism that romanticized laissez-faire principles, government was already active in the economy. Government’s finger was tipping the scale in favor of capitalists and against working people, whereas socialism would orient government efforts toward aiding the working class.
When socialists criticized bankers and the privately owned banking system, they connected with an established pillar of working-class political culture. Large numbers of workers and farmers studied, discussed, and debated a variety of financial reforms. And with a lineage extending back to the Greenbackers and the Populists, government banking was deeply embedded in this political tradition. However, as the socialist movement grew in the first decade of the twentieth century, a former Populist vice presidential nominee, Thomas E. Watson, became one of socialism’s more vociferous critics. Many participants in the Populist uprising of the 1890s — most of whom were farmers — disagreed with Watson. They considered socialism to be a fuller development of their political philosophy. “I had the pleasure of voting for you in ’92,” a resident of upstate New York informed Watson, “and it is a matter of profound regret . . . that you cannot . . . step forward into the Socialist party.”19 Yet despite Watson’s denunciations of socialism, he promoted the idea of a federal bank that would make low-interest loans more widely available. It’s unsurprising then, given these two movements’ overlapping ideas, that in Oklahoma, Louisiana, and Texas, historian James R. Green found that “former radical Populists played an important role in building the early Socialist party locals.” Their political efforts proved highly successful, with one in six Oklahoma voters casting their ballots for Debs in the 1912 presidential election, an electoral result that rested on enthusiastic support from farmers.20
In 1912, the Socialist Party had put aside the ideological objections of some members and embraced farmers as fellow members of the working class.21 For workers, banking was an urgent political issue because the existing system’s instability ignited and fueled punishing economic depressions. Moreover, given that periodic hard times were a fact of life, those who managed to accumulate a nest egg wanted it to remain secure. In addition to these concerns, affordable credit was an especially pressing matter for farmers, since for them borrowing from lenders was analogous to the wage relationship between workers and employers. Credit allowed farmers to purchase essential supplies like seeds and fertilizer, and the agricultural loans that farming required typically imposed high and even usurious interest payments. Therefore, when socialists discussed banking, they spoke directly to a paramount concern of farmers. A leading socialist organizer in Oklahoma, Oscar Ameringer, stressed that “nationalization of the banking system, loaning money at actual cost, would give capital to the usury ridden farmer at a rate . . . lower than his greatest expectations.”22 The high cost of farm loans motivated supporters of the Bank of North Dakota — the sole state bank in the nation today — who persevered against opposition to its creation in 1919 and subsequently shielded the institution from attacks during its vulnerable early years.23
“The collective ownership and democratic management of the banking and currency system” became part of the Socialist Party platform in 1912.24 But government banking was much discussed and highly popular among working people well beyond party circles throughout the first half of the twentieth century. Postal banking was one form of government banking that received extensive public support. Numerous labor unions and farmer organizations lobbied to secure the 1911 establishment of the Postal Savings System, whose sole function was to offer savings accounts for small depositors. Shortly after the system’s inauguration, the 1912 American Federation of Labor convention sought to expand its role, resolving that funds deposited in the Postal Savings System should “be loaned to individuals . . . preferably to laboring people striving to obtain a home.” For decades, working people continued to urge that the Post Office Department become a full-fledged bank, offering checking accounts and low-interest loans through the nation’s extensive network of post offices.25
An additional legislative victory during this era that owed much to advocates of public banks involved farm lending. From the Populist movement forward, farmers had called repeatedly for the national government to provide them with affordable credit. Farmers frequently condemned bankers as superfluous and burdensome intermediaries who extracted unearned profit through interest payments. “Why not cut out this useless middle man, and the high rates of interest?” demanded one Nebraska farmer. In 1915, the Appeal to Reason spoke to this grievance, observing that under existing practices “the farmer suffers most” — even becoming “a debtor citizen” — and proposing to replace “private control of money and banking” with “absolute public control.” That summer, the nation’s three largest farmer organizations “unanimously agreed” on a plan that would create a federal government program for loaning money directly to farmers at low interest. The Federal Farm Loan Act of 1916 established an agricultural lending system that fell short of achieving the strictly governmental institution that many farmers favored. Still, this new system had access to funding from the United States Treasury and was governed by public officials. As farmers had predicted, the result was lower interest rates under more favorable terms.26
Producers and Parasites
Public banking proposals multiplied rapidly during the early years of the Great Depression, when one-fifth of the nation’s privately owned banks failed. In addition to difficult economic conditions, mismanagement and white-collar crime played significant roles in the banking crisis. In response to this financial disaster, the grassroots of the socialist movement pressed the case for government banks. “Captain Kidd in his most balmiest days would have gladly exchanged his piracy business for this ‘legitimate’ banking business,” one socialist declared in a letter to the editor. “The public ownership of all the banking institutions . . . is the only hope of the public for redemption from the present chaotic banking conditions that has helped paralyze this country.” Another correspondent implored the Milwaukee Leader “and all the other Socialist papers [to] print a form for a petition that the people could use to petition the government to establish government banks.” The Reading Labor Advocate did not promote such a petition drive but did urge that banking be “made a government function” as the “first step” toward replacing “the private profit system of industry.”27
The collapse of the private banking system in 1933 forced President Franklin D. Roosevelt to declare a national bank holiday immediately following his inauguration. The Socialist Party presented the new administration with a plan for transitioning to government banking. The Houston Post, a Democratic newspaper, predicted that recent events would make the nation especially receptive to socialist banking proposals.28 Yet given the extent to which the Depression undermined the standing of financial, business, and other orthodox economic authorities, the 1930s proved to be particularly frustrating for the movement. The Socialist Party’s emergence from World War I as a significantly reduced political force set the stage for this anticlimactic period. Socialist leader Norman Thomas perceptively observed that the New Deal undercut the party’s appeal, sarcastically remarking that Roosevelt carried out its program “on a stretcher.”29
Yet during the Depression, farmers and workers demanding government ownership and operation of banking embraced principles that socialists upheld, notably that existing economic arrangements awarded unaccountable private actors too much power, that the profit motive should not govern economic activity, and that the economy was a collective endeavor that ought to promote the common good. For example, New York City plunged into a fiscal crisis in the early 1930s, which empowered bankers to dictate budget policy as a condition for extending the loans that the city required to avoid default.30 Socialist leader Morris Hillquit recommended a municipal bank “as a protection against the domination of private bankers.”31 Appalled teachers in the public school system rallied to this cause, and their union denounced the banks for subverting fundamental democratic practice. In 1933, the American Federation of Teachers condemned the bankers’ “conspiracy to control government through their power to withhold credit,” resolving in favor of “a system of national banks under federal ownership and control.” The union had concluded that “only through government control of banking and credit can the manipulation of our financial structure for private ends be terminated.”32
Meanwhile, on the other side of the nation, the leading organization of small farmers in California — the State Grange — declared in its journal that banking “is not a producer of wealth — it is a middleman” and envisioned government banks that made affordable credit available on an equitable basis. Since banks were merely the intermediary between money and borrowers, these farmers believed it was necessary to remove the profit motive from banking by making “the government . . . the channel through which the cash and credit of the nation is made available to the people.” This arrangement would promote modest economic success, thereby supporting the financial security of citizens and sustaining the health of communities. Emphasizing that banking should not operate in the interest of profit extraction, the district grange of San Joaquin County insisted that “the service which money is designed to perform is that of a collective nature . . . private control of either the circulation of credit or the expansion of credit destroys the equitable feature of this service.” These Grangers accordingly “urge[d] a complete control of all monies by the government and the distribution of all monies through government agencies.”33
New Yorkers and Californians promoting the transformation of banking into a government function represented a prevalent opinion among working people nationwide. Support for nationalizing banking was expressed in multiple forms and in varied places, including through the state federations of labor of Colorado, Idaho, Indiana, Montana, Oklahoma, Oregon, and Washington; the state granges of California, Idaho, Missouri, Oregon, and Washington; and the state farmers’ unions of Iowa, Kansas, Missouri, and Montana.34 As late as World War II, the Minnesota State Federation of Labor wanted “private persons and corporations . . . forbidden to do a banking business . . . in order that value of money, of commodities, and of Labor power be stabilized and freed from the manipulations of speculators.” During the war, a union oil worker (and devoted advocate of government banking) echoed the venerable tradition of warning that “a few ruthless, cold-blooded, brutal private bankers have the power to bring on . . . continued economic chaos.”35
Although historians writing after the cultural turn often portray each glance, gesture, and utterance of marginalized individuals as consequential acts of resistance, a historical discrepancy exists between the prevalence of grievances among working people and the comparative infrequency of political action on their part.36 In order to produce effective action, a sense of injury requires a cogent interpretation of its causes. Workers and farmers who studied banking issues regularly concluded that bankers were parasites who profited from the labor of producers. This understanding encouraged working people to believe that their labor entitled them to both a fair share of what the economy produced and greater control over economic institutions themselves. After all, even though bankers performed no productive service, the existing banking system imposed these superfluous middlemen — exploitative figures who used the money that depositors had earned to extract undeserved income from borrowers.
The sharp juxtaposition of productive labor and unproductive finance yielded a producerist analysis that promoted a sense of solidarity among working people. Producerism holds that honest work creates wealth; hence producers should receive the fruits of their labor, not idle parasites. “What do the bankers produce that they can live on the fat of the land while we who produce everything have almost nothing of what we produce?” asked one Californian during the Depression.37 This perspective expressed a stark perception of opposing economic interests — a form of class division that inspired political action. Workers and farmers who considered themselves contributors to the commonweal shared a sense of exploitation at the hands of these nonproducers. Producerist convictions inspired working people to imagine banking alternatives that would rectify existing injustices and elevate the common good. Discontent with the private banking system promoted the idea that government banking could make the economy more responsive to democratic principles. This insight advanced a sense of the possible that motivated activist workers and farmers to campaign for public banks through their membership organizations.
Of course, in spite of the strength of public support for government banking, private banking remains the default model in the United States. When the banks collapsed in 1933, President Roosevelt was compelled to impose federal control over the entire system. The prestige of bankers was badly tarnished, and banks were not functioning. “It ought to be accepted as a principle,” Norman Thomas argued, “that banks saved only by government action . . . should pass absolutely into the control of the government and not be returned to the owners who could not manage them.”38 But in this moment of crisis, Roosevelt made the expedient decision to resurrect the private banking system. One supporter of the socialization of banking with contacts inside the administration reported that “the money changers whom Mr. Roosevelt drove out of the temples in his inaugural [are] congregating in the White House and telling him what to do.” The leading administration official during the crafting and execution of the bank holiday later observed that “capitalism was saved in eight days.”39
The ability of the private banking system to survive this trial shows how firmly entrenched its power was. But the extent of this power also makes clear both how audacious the grassroots banking politics campaign was and how remarkable its achievements were. The hostile opposition of bankers, for example, could not prevent the establishment of a government bank that extended throughout the nation: the Postal Savings System, often referred to as “Uncle Sam’s Savings Bank.” Rather than deter champions of government banking, awareness of the strength of their opponents actually motivated populist advocacy. “Do not get it into your heads brother farmers that these well fed bankers are going to let you get away from their crib if they can help it,” stressed Grange leader Carey B. Kegley. “The picking is entirely too good for them ever to permit you to be relieved from paying tribute.” Proponents of postal banking maintained their efforts to extend the institution following its establishment. Kegley, for example, proposed lending its funds to farmers at low interest.40 The possibility of comprehensive postal banking remained a threatening prospect to bankers until waning public interest in financial questions allowed them to lobby successfully for the Postal Savings System’s termination in 1966.
From today’s vantage point, it’s remarkable how frequently bankers were forced on the political defensive during the first half of the twentieth century. The relative ease with which bankers have promoted their desired deregulatory agenda and extracted government bailouts in recent decades underlines this point. “The banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill,” stated Senator Richard J. Durbin during the 2007–8 financial crisis. “And they frankly own the place.”41
The achievements of banking politics in its heyday were possible because of the vibrancy of the era’s worker and farmer organizations. Institutions that working people created and maintained served as schoolhouses where members discussed and debated financial issues. These autonomous spaces were relatively free of the economic orthodoxies that were used to defend established power relations. Within this sphere, bankers lacked authority and standing, which fostered an oppositional politics that — unlike the society at large — did not defer to the private banking system and its allies. Through participation in this populist political culture, workers and farmers became more fully conscious of the extent to which their own interests were at odds with the existing banking and monetary system, and consequently freer to formulate their own visions for what that system should become. Additionally, labor unions and farmer organizations provided working people with a collective voice that amplified their influence inside policymaking circles. This institutional framework allowed working people to challenge the prerogatives of bankers.
Sanders 2016 and Afterward
The economy and resulting social structure that made possible early twentieth-century banking politics has passed into history. The small farmers who were central to this politics are much diminished in number, and the labor movement has been in retreat for decades. But the inherent economic dynamic that generated mass interest in banking questions remains relevant today. In important respects, the relationship between the public and the current banking system resembles the situation that gave rise to grassroots banking politics over a century ago. Large numbers of Americans increasingly contend with burdensome debts as a regular feature of their lives. And the banking structure has become more unstable in recent decades, producing the savings and loan crisis of the 1980s, the financial crisis of 2007–8, and the spate of failures among large so-called “regional” banks in 2023. Stimulating a renewed interest in banking politics, as Sanders did, could create pressure for vital changes in American society today.
In his 2016 presidential campaign, Sanders achieved a significant breakthrough: reintroducing politics rooted in class analysis to the national scene. One of his main themes on the campaign trail was the threat that banks — and especially the large banks of Wall Street — posed to working families. Sanders demonstrated that banking could again become an issue that mobilizes voters. He described “an economy and a political system that has been rigged by Wall Street to benefit the wealthiest . . . at the expense of everyone else.” Too-big-to-fail banks and pervasive white-collar crime, Sanders argued, define the nation’s banking system, abetted by a regulatory regime that “has been hijacked by the very bankers it is in charge of regulating.” He promised a dramatic departure from existing policies if elected. “Big banks will not be too big to fail,” Sanders pledged. “Big bankers will not be too big to jail.”42
Although a democratic socialist, Sanders did not advance the nationalization of banking as the solution. The political culture of banking politics that made such proposals so common in the past had faded away decades earlier. Still, Sanders promised a true break from the status quo that included reviving postal banking, which would have “an important role in providing modest types of banking service to folks who need it.” Furthermore, Sanders made Clinton defend her affiliation with Wall Street, demonstrating that for many voters such connections with the financial sector had become a political liability. The populist analysis of the banking system that Sanders articulated echoed criticisms that were heard widely in the early twentieth century. “A handful of people on Wall Street,” he observed, “have extraordinary power over the economic and political life of our country.” But the most striking link to the past was how Sanders proposed to do something about this undue influence. “When millions of working families stand together, demanding fundamental changes in our financial system,” he observed, “we have the power to bring about . . . change.”43
Socialism received a major boost from the Sanders campaign, but today’s socialism isn’t the working-class movement of the early twentieth century. Among members of the nation’s largest socialist organization, the Democratic Socialists of America, a 2021 survey found that more than 80 percent had a college degree and 35 percent had an advanced degree.44 But when Sanders talked about banking, he reached a different audience. A key strength of Sanders’s 2016 candidacy was the clarity of his class-based message. By addressing banking, Sanders communicated a commitment to advancing the material interests of working people. Placing discussions about banks, bankers, Wall Street, and the Federal Reserve at the center of his campaign allied Sanders with struggling workers — those harmed by financialization, deindustrialization, corporate outsourcing, foreign-trade agreements, and the other economic reconfigurations that have disadvantaged workers. His depiction of finance offered structural clarity and presented specific reforms without becoming overly technical. Rebuilding working-class institutions and political power requires this type of compelling analysis of issues that are relevant to the everyday lives of citizens.
Consumer banking services are fundamental to daily life. At publicly accountable government banks, working people would benefit materially from consumer services that are not grounded in profit extraction. At public institutions, the profit motive wouldn’t inspire administrators to shave expenses and inflate revenues by increasingly monetizing, minimizing, and even eliminating functions that depositors and borrowers value — a never-ending push within the private banking system.45 The agenda of officials wouldn’t revolve around levying high interest payments, imposing large fees, inventing entirely new fees, automating customer service jobs, closing branch offices, and devising various strategies to reduce services and nickel-and-dime consumers. Instead of commodifying personal financial information, public banks could offer privacy protections. Credit unions represent a notably successful example of cooperative enterprise in the United States because they provide their members an attractive alternative to for-profit banks. Government banking would attract patronage and win public support for the same reason.
Government banking could have a salutary macroeconomic function, offering countercyclical support when economic conditions worsen. Stepped-up lending during such periods could reinforce other fiscal and monetary responses, including jobs guarantee programs. At the state and local levels, government banks could brace sagging budgets amid tax-revenue declines. The funds of government banks could create opportunities to extend concrete gains to working people in normal economic times as well. The following discussion suggests some ways that government bank assets could be used to benefit working people in their everyday lives.
Austerity policies have diminished numerous public goods, but government banking could provide affordable opportunities for financing a diversity of job-creating public works projects at the federal, state, county, and municipal levels. Instead of confronting burdensome interest payments through the typical array of private lenders and bondholders, government agencies could borrow funds at more attractive terms, making possible projects that would otherwise be deemed unviable.
The nation’s public spaces are too often poorly maintained and even crumbling. Educational facilities such as schools and libraries, in addition to more specialized structures like museums and planetariums, could be constructed and renovated using financing provided by government banks. Buildings that serve the public, from municipal hospitals and clinics to community centers and post offices, could be transformed from blueprints into bricks and mortar. New and improved recreational spaces, including parks, playgrounds, swimming pools, tracks, baseball and softball diamonds, and basketball and tennis courts, could be another outcome of such financing. Cash-strapped public transit and other infrastructure systems struggling to make needed improvements and repairs could also benefit. The Tennessee Valley Authority stands as a legacy of the New Deal and evidence of what government infrastructure initiatives can accomplish.46 Government banks could finance infrastructure projects involving transportation, energy, water, communications, and other sectors from the local to national levels.
Affordable housing is a pressing issue throughout the nation. Increasing numbers of working-class residents of both major cities and rural areas are finding it difficult to maintain a stable housing situation. Fiscal constraints are an obstacle to otherwise workable government-owned and rent-regulated solutions. While private investors avoid housing projects that don’t promise high returns, government banks could fill that void by financing social housing programs, ones that need not repeat the mistake of mid-twentieth-century public housing projects of limiting eligibility to lower-income residents. Shoddily constructed, poorly maintained, loosely managed projects intended only for very low-income residents were a recipe for failure. This unfortunate precedent supports not being so exclusive in the future. Many people in middle-income brackets would welcome the opportunity to participate in quality, well-managed social housing programs.47
Using the financial power of government banks to save jobs would forge a critical connection between these institutions and the lives of workers. In response to the deindustrialization that devastated numerous communities during the 1970s and 1980s, a movement emerged among workers to acquire and operate discarded manufacturing facilities. In 1987, the historian and labor activist Staughton Lynd observed that such ideas “have made something akin to socialism acceptable to middle American working people.”48 However, in order to be viable, this concept requires workers and their allies to secure large sums of money. Under the private banking regime, lack of the necessary financing for such endeavors has impeded this strategy. Although the wave of intense disinvestment that created the Rust Belt has passed, corporate abandonment has continued.49 Government banking could alter the calculus when workers face job losses.
Government banking presents opportunities for a host of public policy options, serving as a stimulus for potential government solutions to existing social problems. Objections on financial grounds frequently halt proposals for new and expanded public services and projects. The pool of funds in government banks would loosen this restraint. In this way, government banking could combat public resignation to the status quo. While it would remain necessary to set policy priorities, ideas once dismissed as unrealistic would be deemed worthy of further consideration. Proposals that previously appeared unrealizable would look more attainable. It would become easier to imagine viable social change. The basis of political life would move toward possibilities.
During the first half of the twentieth century, millions of Americans supported government control of banking in a nation where socialist principles supposedly lacked appeal. They wanted the economy to operate in the service of the workers and farmers whose labor underwrote national prosperity, and they believed that realizing this populist vision required a banking system oriented toward public service instead of private profit. Although most advocates of government banking did not identify as socialists, they were sympathetic to the socialist ideal of democratizing the economy. The recent rise of Bernie Sanders in national politics reveals latent support for socialist ideas among working-class voters, including the white working class, who are frequently dismissed as innately reactionary.50 The history of banking politics in the United States is a striking reminder of what organized working people can achieve. Similar financial grievances circulate among the American working class today, serving as a potential source of popular political action in the future.
Notes.
1. Bernie Sanders, “Remarks on Wall Street and the Economy in New York City,” American Presidency Project, January 5, 2016. The people who figure in this article tended to switch between such terms as “Wall Street” and “bankers” when referring to those who had financial power. Their analyses, however, were drawn primarily from the actions of banks and bankers, which are the terms I favor in this article.
2 Kirsten Powers, “Hillary’s Bernie Problem: Pie-in-the-Sky Sanders,” USA Today, February 16, 2016.
3 For millions without bank accounts, the absence of banking services is a relevant matter.
4 Jared Abbott et al., Commonsense Solidarity: How a Working-Class Coalition Can Be Built, and Maintained (Brooklyn, NY: Jacobin, Center for Working-Class Politics, YouGov, 2021); Matt T. Huber, “Still No Shortcuts for Climate Change,” Catalyst 4, no. 4 (2021).
5 From Businesses and Banks to Colleges and Churches: Americans’ Views of U.S. Institutions (Washington, DC: Pew Research Center, 2024).
6 Philip Bump, “Shock Poll: Everyone Hates Wall Street,” Washington Post, June 30, 2016.
7 R. Thomas Herman, “Many Think Selfishness, Greed Are Widespread on Wall Street,” Wall Street Journal, October 18, 1996.
8 The American Appetite for Government (Washington, DC: American Compass, 2024).
9 Michael Schroeder, “Mesta Plans More Pay,” Pittsburgh Post-Gazette, October 11, 1983; R. Lee Hotz, “Coalition’s Muscle Keeps City Nabisco Plant Open,” Pittsburgh Press, December 22, 1982.
10 Frederick A. Barkey, Working Class Radicals: The Socialist Party in West Virginia, 1898–1920 (Morgantown: West Virginia University Press, 2012); Richard W. Judd, Socialist Cities: Municipal Politics and the Grass Roots of American Socialism (Albany: State University of New York Press, 1989); Donald T. Critchlow, ed., Socialism in the Heartland: The Midwestern Experience, 1900–1925 (Notre Dame, IN: University of Notre Dame Press, 1986); James R. Green, Grass-Roots Socialism: Radical Movements in the Southwest, 1895–1943 (Baton Rouge: Louisiana State University Press, 1978).
11 Christopher W. Shaw, Money, Power, and the People: The American Struggle to Make Banking Democratic (Chicago: University of Chicago Press, 2019).
12 Herbert M. Bratter, “The Committee for the Nation: A Case History in Monetary Propaganda,” Journal of Political Economy 49, no. 4 (1941); Scott Beekman, William Dudley Pelley: A Life in Right-Wing Extremism and Occult (Syracuse: Syracuse University Press, 2005), 83–93.
13 This commonly held interpretation corresponds with Karl Marx, Capital, vol. 3, ed. Frederick Engels (New York: International Publishers, 1967),544–45.
14 William C. Pratt, “The Reading Socialist Experience: A Study of Working Class Politics” (Ph.D. diss., Emory University, 1969); Henry G. Stetler, The Socialist Movement in Reading, Pennsylvania, 1896–1936 (Storrs: University of Connecticut, 1943).
15 James H. Maurer, It Can Be Done (New York: Rand School Press, 1938), 90.
16 Maurer, It Can Be Done, 90, 110.
17 United Mine Workers of America, Proceedings of the Nineteenth Annual Convention (Indianapolis: Cheltenham Press, 1908), 235.
18 “The Banker Knows,” Appeal to Reason, January 25, 1908.
19 “Letters From the People,” Watson’s Magazine, April 1906.
20 Green, Grass-Roots Socialism, 27, 29, 244–52.
21 John Spargo, ed., National Convention of the Socialist Party, 1912 (Chicago: Socialist Party, 1912), 192–93; Lawrence C. Goodwyn, “The Cooperative Commonwealth and Other Abstractions: In Search of a Democratic Promise,” Marxist Perspectives 3, no. 2 (1980): 20–22; Donald B. Marti, “Answering the Agrarian Question: Socialists, Farmers, and Algie Martin Simons,” Agricultural History 65, no. 3 (1991).
22 Oscar Ameringer, Socialism for the Farmer (St Louis: National Rip-Saw Publishing Co., 1912), 28.
23 Michael J. Lansing, Insurgent Democracy: The Nonpartisan League in North American Politics (Chicago: University of Chicago Press, 2015), 97–99, 147–49, 153, 232–34; Alvin S. Tostlebe, “The Bank of North Dakota: An Experiment in Agrarian Banking” (Ph.D. diss., Columbia University, 1924), 123–62.
24 Spargo, National Convention of the Socialist Party, 197.
25 American Federation of Labor, Report of Proceedings of the Thirty-Second Annual Convention (Washington, DC: Law Reporter Printing Company, 1912), 379; Christopher W. Shaw, “‘Banks of the People’: The Life and Death of the U.S. Postal Savings System,” Journal of Social History 52, no. 1 (2018).
26 “Bankers Have Bound the Farmers Hand and Foot,” Appeal to Reason,February 27, 1915; Christopher W. Shaw, “‘Tired of Being Exploited’: The Grassroots Origin of the Federal Farm Loan Act of 1916,” Agricultural History 92, no. 4 (2018).
27 “The Banking Pirates,” New Leader, November 21, 1931; “Banking,” Milwaukee Leader, February 17, 1933; “When Will the Banks Open?” Reading Labor Advocate, March 17, 1933.
28 Robert S. McElvaine, The Great Depression: America, 1929–1941 (New York: Times Books, 1984), 136–42; Shaw, Money, Power, and the People, 183.
29 John Kenneth Galbraith, The Great Crash, 1929 (Boston: Houghton Mifflin Company, 1988), 114–15; Herman E. Krooss, Executive Opinion: What Business Leaders Said and Thought on Economic Issues, 1920s–1960s (Garden City, NY: Doubleday & Company, 1970), 20–21; Arthur Mann, “Socialism: Lost Cause in American History,” Criterion 19, no. 3 (1980); W. A. Swanberg, Norman Thomas: The Last Idealist (New York: Charles Scribner’s Sons, 1976), 204.
30 Cynthia Horan, “Agreeing with the Bankers: New York City’s Depression Financial Crisis,” Research in Political Economy 8 (1985).
31 “Hillquit Proposes a Municipal Bank,” New York Times, October 20, 1932.
32 American Federation of Teachers, Proceedings, Seventeenth Annual Convention (n.p., 1933), 462; American Teacher 17, no. 1 (1932): 27.
33 “State Owned Banks May Solve Problem,” California Grange News, July 1934.
34 Shaw, Money, Power, and the People, 183, 206–7, 230, 259, 269.
35 Minnesota State Federation of Labor, Proceedings of the Sixty-Third Convention (St Paul, MN: The Federation, 1945), 112; Oil Workers International Union, Proceedings, Fourteenth National Convention (Fort Worth, TX: OWIU, 1943), 201.
36 E. P. Thompson, “The Crime of Anonymity,” in Albion’s Fatal Tree: Crime and Society in Eighteenth-Century England, Douglas C. Hay et al.(New York: Pantheon Books, 1975), 304–8; Vivek Chibber, The Class Matrix: Social Theory after the Cultural Turn (Cambridge, MA: Harvard University Press, 2022), 106–10.
37 Shaw, Money, Power, and the People, 24–26, 267.
38 Norman Thomas, “Timely Topics,” New Leader, March 11, 1933.
39 Ernest H. Gruening to Norman Thomas, March 9, 1933, reel 1, Norman Thomas Papers, New York Public Library; Rexford G. Tugwell, In Search of Roosevelt (Cambridge, MA: Harvard University Press, 1972), 272; Raymond C. Moley, After Seven Years (New York: Harper & Brothers Publishers, 1939), 155.
40 Washington State Grange, Proceedings of the Twenty-Fifth Annual Session (Olympia, WA: Recorder Press, 1913), 37.
41 Robert Weissman and Joan Claybrook, The Corporate Sabotage of America’s Future and What We Can Do About It (Washington, DC: Essential Books, 2023), 33.
42 Sanders, “Remarks on Wall Street.” See also Bernie Sanders, Our Revolution: A Future to Believe In (New York: St Martin’s Press, 2016), 296–317.
43 Sanders, “Remarks on Wall Street”; “Why Bernie Sanders Wants Post Offices to Offer Banking,” Scripps News, October 29, 2015.
44 DSA Growth and Development Committee, DSA Member Survey Report, 2021 (n.p., 2021).
45 Ralph Nader, In Pursuit of Justice: Collected Writings, 2000–2003 (New York: Seven Stories Press, 2004), 208, 236–37, 371–73, 399–401; Bob Sullivan, Gotcha Capitalism: How Hidden Fees Rip You Off Every Day — and What You Can Do About It (New York: Ballantine Books, 2007), 57–69.
46 Robert D. Leighninger Jr, Long-Range Public Investment: The Forgotten Legacy of the New Deal (Columbia: University of South Carolina Press, 2007), 102–17.
47 Nicholas Dagen Bloom, Public Housing That Worked: New York in the Twentieth Century (Philadelphia: University of Pennsylvania Press, 2008); Joshua B. Freeman, Working-Class New York: Life and Labor Since World War II (New York: New Press, 2000), 105–24.
48 Barry Bluestone and Bennett Harrison, The Deindustrialization of America: Plant Closings, Community Abandonment, and the Dismantling of Basic Industry (New York: Basic Books, 1982); Mike Stout, “Eminent Domain and Bank Boycotts: The Tri-State Strategy in Pittsburgh,” Labor Research Review 1, no. 3 (1983); Staughton Lynd, “The Genesis of the Idea of a Community Right to Industrial Property in Youngstown and Pittsburgh, 1977–1987,” Journal of American History 74, no. 3 (1987).
49 John Russo and Sherry Lee Linkon, “The Social Costs of Deindustrialization,” in Manufacturing a Better Future for America,ed. Richard A. McCormack (Washington, DC: Alliance for American Manufacturing, 2009).
50 J. C. Gillies, “‘Feel the Bern’: Marketing Bernie Sanders and Democratic Socialism to Primary Voters,” in Political Marketing in the 2016 U.S. Presidential Election, ed. J. C. Gillies (Cham, Switz.: Palgrave Macmillan, 2017); E. S. Fertik, “The New Political Arithmetic: Who Voted for Bernie, Who Voted for Hillary, and Why,” New Labor Forum 25, no. 3 (2016).
Christopher W. Shaw is the author of Money, Power, and the People: The American Struggle to Make Banking Democratic and First Class: The U.S. Postal Service, Democracy, and the Corporate Threat.
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