A Beginner's Guide to Bank Failures

By Ahjamu Umi

Republished from Hood Communist.

According to a February 2023 Federal Deposit and Insurance Corporation (FDIC) audit, 563 U.S. banks have failed and/or come under regulatory authority since 2021. Here in California, U.S., the latest casualty has been the Silicon Valley Bank (SVB). This latest rash of bank failures, especially within the software start up SVB, have alarmed apologists for capitalism all over the world. With this piece, we are hopeful we can bring some fundamental understanding of “bank failure” and what’s happening for everyday working people.

First, it should be explained that the Federal Deposit Insurance Corporation (FDIC) is an institution of the U.S. federal government. It exists to provide some level of guarantees against bank failure. They do this by regulating banks, auditing them, and insuring bank deposits for up to $250,000 USD (aggregate deposits per institution). 

What Does This Mean?

Let’s say for example, you have $275,000 in liquid asset deposits in any U.S. bank. If that bank fails and/or comes under FDIC jurisdiction, your deposits for up to $250,000 are insured by the federal government, meaning the government should issue you a check for that amount. The remaining $25.000 in deposits that you had in the failed bank makes you now a creditor for that bank. This means they owe you that money, just as you owe your credit card companies, car finance institutions, etc.

Of course, like any creditor/borrower relationship, your ability to get repayment has no guarantee. The bank can come under bankruptcy protection, etc., which means you would lose all or most of that $25,000 in this hypothetical example. But that is a fundamental definition of the role of the FDIC. It’s worth noting that credit unions are governed by the National Credit Union Administration (NCUA), which serves the same general purpose for credit unions that the FDIC serves for banks, including insuring deposits for up to an aggregate $250,000 per customer/member per institution.

It’s important to also note that the FDIC was formed in 1933 as a result of the Banking Act legislation. This happened four years after the great stock market crash of 1929 which means the FDIC was created as a vehicle to encourage renewed trust in the U.S. banking system. It’s that question of trust that provides the basis for creating a simple way of analyzing and understanding what is happening with banks within the capitalist system and how to interpret these bank failures.

The Origins of the Banking System 

Contrary to popular opinion, the international banking system, and the concept of capital as the foundation of that system, did not start from the creative and intellectual genius of the fathers of the capitalist system. Instead, the start up capital for the international banking system came directly from proceeds produced from the enslavement of kidnapped Africans. The labor of their work was converted to revenues that were invested to initiate the banking system and the capital it would rely on to facilitate its existence. Every large international bank today from Chase to Barclays owes its origins to this nefarious beginning. If we understand and accept this irrefutable history, it should be easy to understand that the capitalist banking system, from its beginning, has been about exploitation and its that reality that paves the way for greater understanding of what’s happening today.

How Banks Work 

Banks operate by taking your deposits, no matter how large or small, and investing those deposits to generate capital. The more money you have to deposit, the greater incentives the banks provide you for doing so, for example: no fees, more services, slightly higher dividends (returns on your deposits), etc. Whether you have $250,000 deposited in a bank, or $25, the process works the same. Your money is used by the bank to invest in any number of financial projects designed to provide a positive return for the bank on your deposit. For the overwhelming majority of us, this is done with little to no return to you. 

Let’s say you have a job where your paycheck is directly deposited into your bank account every two weeks, say $2500 twice per month, and from each check you have $300 automatically transferred into your savings account. That means you are saving $600 USD per month. You will receive next to nothing for that money sitting and growing in that bank, but the bank will use your deposits and invest them in any number of profit generating projects— primarily exploitative projects around the world because those types of investments are the best suited to produce the highest return on the dollar. Think exploitative companies that steal resources from Africa for example. Companies like Dutch Royal Shell (Shell Oil) rob Nigeria’s Niger Delta blind drilling for oil. There is no oversight and the workers are paid peanuts. As a result, Shell’s profits continue to break records. Well, a bank will invest in Shell’s stocks and profit from Shell’s theft of resources from Nigeria. As Shell’s profits grow, the bank’s profits grow. And, by profits we mean capital i.e. money the bank earns that serves the sole and specific purpose of being reinvested for additional profits.

That’s why when the capitalist commentators talk about most U.S. banks being “well capitalized” they are actually telling the truth. These banks have millions of dollars – dollars they made investing your deposits – sitting around ready for them to invest to make even greater profits. Meanwhile, you get slim to nothing from them using your money and you will even be penalized if you come upon rough times and cannot maintain the minimum requirements they demand to keep your account(s) going. They have to make those demands of you because if your money isn’t available to them, they have nothing to invest and profit off of it. If you think about it, the banking model is basically the same as someone coming to you, taking your paycheck when you cash it, using your money to make additional money from it, and just returning to you what they took from you in the first place. And, if they are unable to get a return on your paycheck, they are usually supported by the government in their financial challenges while you are left to figure out how to proceed on your own with no help or support.

Silicon Valley Bank & Banks Playing With Your Money

That’s still not even the full story. Besides the example of investing in the exploitative practices of Shell and other criminal multi-national exploitative capitalist corporations, the banks invest heavily into shady and high risk ventures like securities from the secondary market. These types of investments are often bundled high risk mortgage loans, meaning loans provided to buyers who’s repayment potential is questionable, but who agreed to repayment terms at much higher, and profitable, interest rates. These types of unscrupulous business practices by banks have resulted in devastating consequences, such as the 2008 mortgage crash in the U.S. where everyday consumers were left houseless while the banks were bailed out by the 2009 multi-billion dollar gangster deal – compliments of the Obama Administration – one of the most lucrative welfare schemes in human history, recently eclipsed by the $2.2 trillion CARES Act of 2020. As it relates to banks like the Silicon Valley Bank in Santa Clara, California, U.S., the same principles apply. This bank was the home for software startup companies who invested incredible sums of money in highly questionable ventures for most of its 40 year existence. As has been alluded to, this has always been the program of capitalist banks, but in recent years we are seeing the limitations of this strategy much easier because the decline of capitalism has created conditions where the once assumed stability of capitalist banks is now more and more in question. 

Let the Banks Fall While We Rise  

This is a reality that will continue to create hardship for millions of people worldwide, but in the long run, this also has the potential to represent a new day for the masses of humanity where capital no longer controls the narrative everywhere on earth. There are a lot of variables to unpack in order to create that reality, but for now, the best thing all of us can do is engage every effort that we can to educate our communities about the role of banking institutions to profit from our continued exploitation and how the system is set up to support their existence, while making us the main source of accountability for ourselves and their greedy exploitative practices. This problem, like every other problem we face, cannot be resolved through any level of individual initiative. It cannot be resolved by any other approach to stabilizing the capitalist system. This problem is a reflection of the exploitative basis from which capitalism developed hundreds of years ago and it’s simply a manifestation that this profit over people model of operation is existing in its final days. This may be a scary thought to many, but at the end of the day, Kwame Ture was 100% correct when he said that “if we don’t struggle for revolution, we suffer so why don’t we organize and take the suffering as a pathway to our liberation and forward progress instead of just continuing to suffer with no end in sight?”  Capitalist banks are viewed as vehicles to provide us with houses, cars, loans, etc. What they are in reality is a criminal operation that is 100% supported by the U.S. government which is nothing more than a mouthpiece for international capitalism. The sooner we can do the necessary work to create broader consciousness around this, the sooner we can reclaim the resources that rightfully belong, not to a small and criminal elite, but  to the masses of people on earth. 

Ahjamu Umi is revolutionary organizer with the All African People's Revolutionary Party, adviser, and liberation literature author.

As Usual, Most Of Us Miss The Point on Ice Cube and His "Platinum Plan"

By Ahjamu Umi

Republished from Hood Communist.

Rapper/actor/entertainer Ice Cube has worn many hats throughout his professional career.  He started as a so-called gangsta rapper with the impactful group NWA in the late 80s.  Then, he joined forces with Dr. Khalid Abdul Muhammad and the Nation of Islam to become a hardcore Black nationalist rapper in the early 90s.  That phase devolved into him making several high profile records with Mac 10 and WC as the “Westside Connection.”  Records that were part gangsta, part party animal.  Finally, he moved into mainstream motion pictures.

Most recently, he rotated back into the struggle for African self-determination with many public statements supporting protests against police terrorism.  And, in the last several days, its been exposed that he worked, at least on some level, with the administration of the current empire president to help create and/or support the regime’s so-called “Platinum Plan.”  The alleged purpose of this plan is to supposedly uplift the African community within the U.S. with more promises of capitalist advancement for the African masses. 

Most Africans are attacking Ice Cube for working with Trump’s people, but this is an understandable yet extremely subjective and superficial analysis of the real issues here.  What most Africans, and everyone else, will refuse to do is actually study this so-called Platinum Plan.  Most of us will instead rely on sound bites from the capitalist media and celebrity culture.  Most of us will never actually read and assess the plan itself. 

And, studying this plan, and any plan that is supposed to improve the conditions of the African masses, at the very least, requires us to study it in great detail so that’s exactly what we will do here because whether its Ice Cube or Mickey Mouse, our people have to develop increased political sophistication so that we can read through the lines and properly understand what’s being beamed at us.  This is particularly important when you are talking about the Democratic or Republican Parties, both of whom Malcolm X beautifully exposed for us over 50 years ago, although most of us will never study his analysis as well.

You all need to study this so-called plan.  The basis of it is promises to provide three million new jobs for African people.  To create 500,000 African owned businesses by increasing capital in African communities.  A promise of $500 billion in capital.  Higher policing standards (whatever that is supposed to mean).  A Second Step program which is supposed to address criminal justice system reform “while ensuring our communities and streets are safe.”  There are other statements about support for African churches, immigration policies that protect U.S. jobs, and healthcare.

Let’s break down each element here. 

Three million new jobs:  You have the last four years to provide ample evidence for how this regime, (and all the other ones to – we are neither Democrats, nor Republicans, nor Americans) manipulates employment data.  For them, millions of new jobs that pay minimum wage, offer no benefits, and have no job protections is a bragging right.  The truth is there is no where in this country where quality jobs defined as livable wages, affordable healthcare, and safe work conditions are increasing.  What is increasing are service jobs with low wages, no healthcare, and no stability.  These types of jobs serve the economic interests of the bourgeoisie like Trump and he and those in his class have a history of creating these types of low level jobs.  Anyone with even a cursory perspective on this question would understand clearly that the jobs these people are talking about creating will do nothing to improve the collective conditions of African people.

500,000 new African businesses and $500 billion in capital: Whenever a plausible suggestion for providing healthcare for people or rehabilitation efforts, eliminating houselessness, etc., there is immediately an outcry from reactionaries demanding to know “where the money will come from?”  Yet, some of you believe that this level of capital will be invested in African communities to permit us to independently develop.  A quick study of history will reveal to us that this concept, and all these bogus concepts in this so-called plan, are not new.  In the 1960s, in response to hundreds of urban rebellions, the Nixon administration with the support of McGeorge Bundy and the Chevron Foundation, wrote the script for Affirmative Action as a vehicle to create an African petti bourgeoisie that would have class interests that led it to protect the capitalist system.  This was accomplished.  And with that accomplishment its important to recognize that the goal of Nixon, Bundy, Rockefeller and all those folks 50+ years ago was never to uplift the African masses, although that’s the same rhetoric they used then.  It was to do exactly what they did, create an overseer class of Africans.  Today, even if you believe the numbers they are committing to, this is still their objective.  Whether we recognize it or not, the level of mass protests always rock the capitalist ruling classes to their knees.  They will always do whatever possible to control and mitigate that militancy.  Expanding the African petti bourgeoisie is again their answer.  The question you have to ask yourself is if after 50 years ago, there is no clear pathway for the masses of our people to advance through this model, why would you believe this go around will be any different?

Criminal Justice Reform, etc.:  By reform if you mean reducing the systemic inequities in this racist system (and if reform doesn’t mean that then what’s the point), you are living in a fantasy world if you actually believe this plan is going to make that happen.  This mass incarceration system is based on the same exploitative model that built capitalism.  Releasing a handful of people is great because they all need to be released, but as long as there is a capitalist system, there will be people incarcerated on a mass scale and the overwhelming majority of those people are going to be African and Indigenous.  Also, this talk about protecting and keeping jobs in the U.S. is laughable.  These people want you to believe that poor immigrants are the reason jobs are not available.  The truth is corporations have benefitted from the North Atlantic Free Trade Agreement (NAFTA) and other trade tariff agreements to move their operations overseas because its more profitable for them to do that.  The capitalist assault against organized labor along with the refusal of unions to embrace actual political education, has weakened unions and made them revenue motivated entities.  This has done more to create conditions where jobs can leave this economy than anything else and the crafters of this so-called plan are 100% in favor of gutting unions which leaves no voice and protection for workers.

We can go on and on, but the point is this issue is so much bigger than Ice Cube.  This is a question of our lack of political sophistication and our weakness in accepting any random capitalist approved celebrity as our mouthpiece for advancing our people.  When we do this we continue to demonstrate how easily we are willing to be chumped by this system.  Some of us want these things to happen because we are really just concerned about our individual ability to get ahold of some of those dollars that could potentially be invested so that we can build upon our personal business, etc., desires.  These people should be viewed as parasites on our people no different than pimps, drug dealers, etc.  For those of us concerned about the masses of our people, we know that no capitalist plan is ever going to be the solution.  If that was true, it would have happened a long time ago.  Stop looking to celebrities and everyone else to be our voice.  That has simply never worked for us.  Until you see this as your responsibility to get involved and get serious about understanding these issues on deeper levels than the superficial basis we are talking about them now, we will continue to be political chump footballs for everybody who has access to the glitter and lights this system provides to them at your expense.

Guns Without Political Education is Like a Journey Without Direction

[Brett Carlsen/Getty Images]

By Ahjamu Umi

Originally published at the author’s blog.

Africans (Black people) everywhere are expressing joy and support for the presence of this Not F – - king Around Coalition (NFAC).  If you don’t know, they are the coalition of armed Africans who have gathered hundreds of armed Africans, mostly men identifying folks, to display weapons and demonstrate symbolic resistance against white supremacy.

The idea is understandable. Five hundred plus years of African people being terrorized systemically all over the world would certainly generate a strong desire on behalf of our people to strike out against the terror we experience.  So, the concept is perfectly valid.  The only question/concern is what the proper response actually is to address our oppression?

The answer to that last question can only be answered one of two ways.  Either we desire to engage in performative actions that make us feel better about the oppression we experience every-day.  Or, we want to figure out how to eliminate this suffering once and for all.

The challenge of this internet/social media based reality we live with today is we all function under the illusion that just because all of us have the same accounts, a computer, and an ability to voice a perspective, it has become normalized for people to believe all opinions matter.  Or, just because someone has the ability to express an opinion in a post, meme, video, etc., that constitutes a perspective where its value is gauged not on the quality of the information within it, but the form in which the perspective is presented.  In other words, form always supersedes essence.  If something looks good, it will get more likes and attention than something with much more substance that doesn’t appeal to us the same way.

As a result, most Africans, and most people overall, are choosing symbolic actions that make us feel better over actual work to eliminate the oppression.  The European woman in Portland, Oregon, U.S. stripping naked and standing/sitting in front of terrorist police makes some of us feel better because for that moment, the police left.  Of course, the gestapo terrorists came back with a vengeance the very next night, probably further infuriated that they couldn’t terrorize as they wanted the night before. This reality hasn’t stopped scores of primarily European observers from praising this individual act. This symbolic act, as if it represents some tangible victory.  This is the surreal reality we face when we know not one less African has been brutalized by state-sanctioned terrorists anywhere on earth as a result of that woman showing her genitals to those terrorists.

By the same token, these Africans come out in the thousands with these guns.  There is no clear plan or idea about how the guns will be used.  And, as someone who has lots of experience handling firearms, I was more than a little squeamish watching the video of the action today, about how careless many of the armed participants were in handling their weapons (and that was before there were reports of gunshots at the action).

Still, more than a few Africans and other goodhearted people were jumping to the ceiling at the sight of these armed Africans, as if this symbolic action was going to intimidate one gestapo cop or white supremacist from their plans to terrorize any of us.  In fact, the videos from today’s events show glimpses of the white right militia members of the Three Percenters present at the NFAC action.  I’m speaking as an activist/organizer who has stood up against the Three Percenters on multiple occasions.  If those Africans permitted those clear white supremacists (their name depicts their racist interpretation of the history of how this country was formed) to rub shoulders with them armed, that’s nothing we should feel any comfort and strength from. 

There should be absolutely no question that guns, no matter how many of them, without organized political education guiding the usage and existence of the guns, is never a good formula.  Guns without political education, like the title says; is like a journey that has absolutely no direction.  We like the guns and the imagery because it symbolizes us having the power to defend our lives, but as was demonstrated when the shots rang out earlier today, the police – the same gestapos we are in the streets protesting in the first place – were able to instantly take control of the day, despite the presence of all of those Africans with guns.  If nothing else, that should show you how its performative and not anything designed to build capacity and strength for our liberation because if it was, we could never surrender our authority to the same gestapos who are killing us.

The final conclusion for us has to be that even if we have a militia of 10,000 people, even 50,000, while the overwhelming majority of our people are not even involved in any organization, that represents no real strength for the masses of our people.  Instead, it has the potential to be a detriment to our forward progress.  Our history is full of examples of paramilitary groups with no political education and clearly this has not worked out well for us.  In Azania (South Africa), we had the Inkatha Movement in the 80s which was mobilized by the racist apartheid regime to use its massive military strength to work against the African National Congress, the Pan-Africanist Congress of Azania, the Black Consciousness Movement, the Azanian People’s Organization, and all the anti-apartheid forces operating there.  This was possible because of the lack of political education which caused people who rallied around Inkatha to believe the talking points that the anti-apartheid organizations mentioned were fronts for outside “communist agitators.”  In the same vein, the U.S. government was able to manipulate the lack of political maturity within our Black power organizations to easily facilitate violence between the Black Panther Party and the US Organization in which a number of Panthers, including Alprentice “Bunchy” Carter and John Huggins were killed on the UCLA campus in 1969.  There are volumes written by those who lived through those experiences expressing dismay at the toxic masculinity, patriarchy, and the use of guns without the level of organization to ensure the masses are being organized to confront the state to seize power (the only logical reason weapons should ever exist for us).
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Until we get people engaged with organizations, the guns are useless.  We realize that Mao Tse Tung said “power grows out of the barrel of the gun” but his statement should be viewed in the context of the mass organization that his Communist Party in China certainly demonstrated. Without the organized masses – which requires people in organizations – we can’t do anything with guns above just attempting theater to make us feel better about the system continuing to dominate our lives.  At least the good news is simple.  Join some organization working for justice and if you don’t see an organization you feel you can join, start one.  And make sure your organization has a strong political education process.  Once those components are in place, you can add community defense projects that help you train with weapons, but all of that work should always be couched in political education.  Once we recognize this, we can really begin getting to work towards liberation.