Last winter, I was at a restaurant that periodically has days when all tips are donated to a particular charity. This time around, it was Howard Brown, a Chicago-based LGBT health organization that is probably best known for its Brown Elephant thrift stores. The call for donations was particularly urgent: if Howard Brown did not raise a certain amount of money (something like $50K), it would have to close its doors.
It struck me as ridiculous that such a valuable organization could be permanently lost due to such a small shortfall. (As it happens, they were able to raise the money and continue to be doing fine as far as I can tell.) But when I read that announcement — inspired in part by an article about North Dakota’s mini-Fed — I turned to The Girlfriend and declared that they needed to band together with other charities and create a bank. That way, the charity bank could simply give Howard Brown a cheap bridge loan, getting rid of artificial time crunches. (They would still need to raise donations, but the availability of cheap credit would provide for “income smoothing.”)
As we brainstormed further, we thought that taking consumer deposits would be a great idea, too, and would probably be relatively successful — particularly in the wake of the financial crisis, I think many more people are conscious of how destructive for-profit banks can be and would appreciate the opportunity to support a charity bank. In fact, this would provide a way for people to support charities even if they didn’t have enough disposable income to donate, as they could simply move their checking and savings account there. If this seems to be somewhat extraneous to what charity organizations do, I’d point out that there’s no inherent connection between running a thrift shop and running health clinics, for example — and many charities also offer the possibility of gift annuities, which have some conceptual similarities to putting one’s bank deposits in a charity bank.
At this point, this thought-experiment is threatening to enter into some uncomfortable territory similar to my reflections about retirement accounts — could the charity bank (assuming it got up to a certain size) have a proprietary trading desk? Would our assessment of speculative financial engineering change if there was a participant in that zero-sum game who was funnelling the profits to pro-social causes rather than further financial engineering? That’s what Goodchild envisions in his proposal for “value banks” in Theology of Money, which I only later came to understand was basically the same kind of proposal that I was “independently discovering.”
Any thoughts? In particular, does anyone know what concretely would have to happen to build something like this (i.e., would it have to be a credit union, etc.)?