What to do about the banks...?

Thanks to Lambert at Corrente for turning my attention to this intriguing idea:

So there's this guy in Florida running for the Democratic nomination for governor. He has a plan to eliminate property taxes, create a million new jobs, provide free health insurance and free college for all residents, and lots more.

His plan hinges around a proposal to create the Bank of the State of Florida, which will pay 6% for CDs and make mortgage loans at 2% and other loans including small business loans at 3% and make billions for the state. How is this possible, you ask? Using "fractional reserve banking" just like every other bank, except using the profits for the public good.

Dr. Farid A. Khavari says he is "an economist, not a politician," and he can make all of this happen. He is also the author of a book, "Towards a Zero-Cost Economy - A Blueprint to Create General Economic Security in a Carefree Economy" that describes an economic system called "carefreeism," which he compares to capitalism and socialism here. You can download the book for free.

In a previous post, I said that, during this crisis, Obama is in a position to offer much more aid to California (a state which routinely gives more to D.C. than it receives in goods and services), because the federal government can literally make money. But the truth is that banks make money, through the fractional reserve system. So why shouldn't a state -- Florida, California, whatever -- own a bank?

Let's think bigger. What if Uncle Sam owned (and ran, and profited from) Goldman Sachs and the rest of that bunch?

I have no idea who this Khavari guy is. I strongly suspect that, once I learn more about him, he'll turn out to be a crank. Let's face it -- "carefreeism" is the stupidest name for an ism in the history of isms.

But the basic idea...? I'm intrigued. Not sold -- intrigued. I'd like to hear counter-arguments.

The Friedmanites and Randroids will probably cry "socialism!" at the thought of a state-owned banking system. But think about it: The bank makes money only if it loans money to entrepreneurs. Thus, in order to bolster its coffers, the government would need to encourage as much free enterprise as possible.

(About an hour's time separated the writing of the stuff above from the writing of the stuff below.)

Okay, I've started to research Khavari. And I don't like much of what I've seen.

Although he seems to fit nowhere on the standard left-to-right political map, Khavari is an admirer of the former Shah of Iran, one of the worst despots in history. That, my friends, is un-put-up-with-able. The guy also runs something called the Environomic Research Institute, which looks like it could be a scam or a front. On the other hand, one of his earlier books has been cited approvingly by Jeremy Rifkin -- a good sign.

Right now, I'm leaning toward tossing the guy into my crank file.

Not only that. The notion of turning banks into public utilities has been championed before, by a rather shocking personage: Gottfried Feder.

And who, you may be asking, was Gottfried Feder? Well, he was a very strange and disturbing fellow. In 1919, he gave a lecture which enchanted Adolf Hitler and enticed him to cast his lot with the fledgling Nazi party.

In the 1920s, Feder was a leading member of what has been called the "left wing" of the National Socialists. Yes, the Nazis did have a left(ish) wing, or at least an anti-capitalist wing, during the party's gestative years. If you don't believe me, read a few books about the early days; start with Putsch! by Richard Hanser.

Feder was, first and foremost, a vicious racist -- a detestable individual. That fact must never be forgotten, rationalized or minimized. Yet he also favored some ideas which we would now consider far-left -- welfare, labor unions, state-funded health care and a government-guaranteed right to a job.

Feder drafted the 25 point Nazi party program, discussed on this Wikipedia page. Ten of those points are pro-labor; the rest is vile. Hitler gave the program lip-service while running for office, but ignored it as he inched closer to power. In 1931, Hitler tossed Feder "under the bus" (as we would now say) when Feder's anti-capitalist rants began to frighten the industrialists whom Hitler wanted to woo. The economy was turned over to Hjalmar Schact, who thought that Feder was a nut.

In a nut's shell: Feder emphasized the distinction between industrial capitalism and finance capitalism -- between the folks who make shoes and the folks who loan money so that a shoe factory can be built. In his scheme, industrial capitalism = good; finance capitalism = bad. Thus, Feder advocated the creation of a nationalized central bank, to be distinguished from something like the Federal Reserve, which is a private/public hybrid. In American terms, he wanted to hoist the red flag over Wall Street but not over Main Street. Those who lived on "unearned income" -- the Gordon Gecko types -- were to be treated mercilessly.

Oddly enough, Feder was probably influenced in all of this by the American populists of the 1870s-1880s.

Modern fascists have a mixed view of Feder. Some seem attracted to his ideas, and have attempted to re-package them. (Khavari may be in this tradition.) Most of today's goose-steppers sneer at Feder as a commie.

Is Khavari a covert Federist? Does Feder have value? Can his economic notions be considered separately from his racist and nationalist claptrap?

I honestly don't know.

But I can say this: On an instinctive level, I would still prefer to see Uncle Sam take over the "too big to fail" banks instead of handing trillions of dollars to private institutions. Using the banks' profits to help fund the government strikes me as -- if you can forgive my quoting Ollie North -- a neat idea.