Similarities Between US Credit Unions and the German Sparkasse Banks
Executive Summary
- Banks that serve a public service function exist in the US and Germany.
- These are the US credit unions and the German Sparkasse banks.
About Credit Unions of the US
Credit unions are local banks that were at one time set up as non-profits. They historically stuck to a narrow range of services to a specific community and do not need to be perpetually bailed out by the government.
Are Credit Unions Public or Private?
While called “public,” we don’t classify them as public because they do not issue debt-free money and are not entirely controlled by the government. However, they historically had a public interest function (not profit maximization), making them far more preferable over purely profit-seeking private banks. A good quotation that explains how more efficient is more simple public service-oriented banking is than private profit-maximizing banking is found in the following quotation.
“And in 1972, with a U.S. population of just over 200 million, these plain, dumb, boring savings banks financed 2.6 million new housing starts, with no secondary markets, no futures markets, and very modestly paid employees (I started at $140 per week, and had worked my way up to $200 per week as an investment officer). Today, with a population of over 300 million, a massive financial sector, untold financial innovations, and unlimited financial resources and liquidity, if we manage to get 2 million housing starts a year, it’s proclaimed an unsustainable bubble.”
Source: Mosler Economics
However, the issue is that more and more credit unions are for-profit and becoming closer to normal private banks. However, they are still more stable and better actors in banking than the non-credit unions in the US.
About the Sparkasse Banks of Germany
In Germany, something similar is the Sparkasse banks.
They are described as follows.
“Public banks in Germany are financial institutions typically held directly or indirectly by public sector entities such as the federal government, the states, administrative districts or cities. Not all these companies are fully publicly owned. They can also be defined as public because they provide services in the public interest.”
Source: German Public Banking
https://en.wikipedia.org/wiki/German_public_bank
The Sparkasse banks are also the motivation or model for the US credit unions and came far before credit unions. While Sparkasse banks are considered by many to be a major advantage for the German economy. It is of note that these banks are rarely discussed as part of Germany’s success. Instead, most of the credit seems to go to innovation. It is critical that the elite denigrate and or distract from any type of collaborative institution that has a public interested function. In the same way that the elite talk about the destructive outcomes from labor “unions,” the elite and the privately controlled media have little to say about credit unions or the Sparkasse banks.
The Sparkasse Banks Participation in a Study on Comparative Theories of Banking
What is also noteworthy is that while larger private banks refused to participate in a study regarding how banks create money, a Sparkasse bank in Germany was willing to participate.
“The view of the author, based on more than twenty-three years of research on this topic, is that it is the safest bet to ensure that the awesome power to create money is returned directly to those to whom it belongs: ordinary people, not technocrats. This can be ensured by introducing a network of small, not-for-profit local banks across the nation. Most countries do not currently possess such a system. However, it is at the heart of the successful German economic performance in the past 200 years. It is the very Raiffeisen, Volksbank or Sparkasse banks – the smaller, the better – that were helpful in the implementation of this empirical study that should serve as the role model for future policies concerning our monetary system.”
Source: Science Direct
https://www.sciencedirect.com/science/article/pii/S1057521914001070