Common Good Bank Project Development

Updated 10/6/2010

The ™ (CGB) project plan has evolved over the course of several years. This document details the philosophical and strategic underpinning of the project, as well as context for our current situation and plans for completion.

The diagram below is intended to reflect dependencies only — not importance, elapsed time, size of task, historical order, concurrency, or anything else. Each layer provides a conceptual, legal, or practical foundation for the next higher layer. Furthermore, the diagram is intended to address only the Common Good Bank system overall. For example, in conducting the project the Nonprofit Sponsor also requires human systems, IT development, business plans, and funding, but where these things are listed in the diagram they refer to the Common Good Bank system — not the organization creating that system or any of its committees.

Since the project is continuously evolving, so too this document will be continuously updated to reflect new developments and plans. While it is healthy to revisit ALL aspects of the project from time to time, we expect that decisions made near the beginning (generally this means nearer the bottom of the diagram below) will change more slowly and reluctantly than those made more recently. Nevertheless, the entire model is a work in progress and constructive criticism is always welcome. Anything that doesn't kill an idea makes it stronger.

Many of the design components described briefly here have a long history of discussion and reasoning. This document attempts to balance brevity with clarity, so that the reason for each feature is listed here briefly if at all, with more extensive reasoning to be expounded elsewhere, as needed.

In contrast to an evolving strategy designed to address a specific cause, the Common Good Bank project strategy is more like an engineering project. Strategy came first, then design, and finally the current stage — implementation, which is complex and involves a number of challenges. In particular, the challenge of finding adequate funding for implementation requires a flexible and evolving strategy of its own. That challenge is the primary focus of our efforts in 2010.

Click below to jump to a section:

  1. Strategy
  2. Design
  3. Implementation
    1. Underlying Strategy: Think Global Act Local. Do what you can within your domain, for direct effect and as an inspirational model for others to follow.
    2. Underlying Strategy: Gandhian Constructive Program. Build the new society in the shell of the old. Be proactive, positive, and constructive.
    3. [from A+B] Fundamental Strategy: Design and Plant a Rapidly Evolving Seed for a New Society. This is a two step strategy (design and implementation) which reduces the problem to a smaller scale engineering challenge. Once the seed is designed and planted, the task is complete. This type of strategy is attractive because you can always see the whole tunnel, including the light at the end.
    4. [from C] Spiritual Visioning - The World of Our Dreams. Imagine a world where everyone has enough to eat, a place to live, and satisfying work. Imagine that world in vivid detail. Let you spirit dwell there day and night, until you can remember the history of that world — how it came to be — and you see everything in today's world through that lens.
    5. [from C] Design of Evolutionary Mechanism. Life is change. The world is never static. Society in the world of our dreams will be constantly evolving in wonderful ways. In our world today, good ideas emerge. For the most part, ideas that get funded get realized — others don't.

      Money represents the right to arbitrary goods and services — almost anything that a person might want from others. Of course, since people want it, you can get them to do almost anything in exchange for money. So, more generally, money represents power.

      Funding is the way we allocate power in our society. Funding decisions are made, actions are taken, society evolves. Money is the motor. This motor itself is subject to evolution. Whether or not our ideal world involves some such abstraction of power and rights to goods and services, we can use that motor now to drive evolution toward our ideals.
    6. [from C] Principles to Ensure that the Dreams are OUR Dreams. The world of our common dreams is an abstraction. We don't know what that world will be. It isn't even just one world. Every minute someone dies and someone is born. We, the people of Earth, come and go and our common dreams evolve. What we mean by "our dreams" is nebulous and largely unknowable, but the phrase is not meaningless. And we can work toward that ideal without having to know what it is.

      Whatever it is that we are working together to create, as much as possible we want it to be OUR dreams — not the dreams of any one social class, country, or powerful group, but the dreams that we all dream together. Therefore, in steering the evolution of society, we want ideas to come from everyone and decisions to be made by everyone.

      Everyone's "world" is limited, so each person should have a say in every issue to the extent that those issues affect them. In general this requires local decision-making. In order to have the best possible decisions, we want to take advantage of group process synergies and optimal distillation of the "Wisdom of the Crowd" (see, for example, James Surowiecki's book by that title).
    7. [from D] Distillation of Basic Shared Dreams. There are some basic things that we all want for ourselves, our families, people we care about, and hey why not everybody? These things include good food, good health, a home, a friendly community, satisfying work, time to play, and a sense of security. In this sense, we share a vision of a better world:
      • a world where everyone enjoys healthy food, a pleasant home, satisfying work, a good education, and time to play;
      • a world where the abundance of nature and the wealth we have created are protected and used carefully for our common good;
      • a world where community and cooperation are at the center of our lives, where we care about and take care of each and every one of us, delighting in our diversity;
      • a world where decisions are made by everyone, for everyone's benefit;
      • a world without pollution, weapons, injustice, poverty, disease, misery, obscene consumption, corrupt governments and unrestrained corporations;
      • a world at peace.
    8. [from D+E+F] Idealized Design for Economic Democracy. Community-based, one mind one vote, transitive proxies, we decide together what our community should invest in and what it should fund, for the greater good both locally and elsewhere.
    9. [from G+H] Design Principles. Our task is to design a self-regulating, rapidly-evolving socio-economic machine, based on these principles:
      1. Love. Dedication to the common good. The system must benefit everyone, especially those most in need.
        "Recall the face of the poorest and the most helpless person whom you have seen and ask yourself if the step you contemplate is going to be of any use to that person. Will he or she be able to gain anything by it?" — Mohandas K. Gandhi
      2. Freedom. The system must honor and support individuals in taking initiative to be of service to the world in ways they feel called to.
      3. Brings people together to plan and decide for the greater good. Fosters participation. Trains everyone to think well about the greater good.
      4. Empowers people to do what needs to be done, redirecting wealth to fund the common good.
      5. Works with humans at our current level of spiritual and social evolution. Specifically, the Common Good Economy should be hard to corrupt and should align individual profit with profit to the community, allowing participants to give while benefiting personally as well.
      6. Competes effectively within the existing economy, spreading rapidly without harming the environment and without funneling wealth from the poor to the already rich. It should be able to spread fast enough to include all communities everywhere on Earth within 20 years.
      7. Transparency. All of us can see how the system works and take responsibility for it.
    10. [from I] Organization. An organization will manage the design and implementation of those design principles. The organization itself operates according to those same principles. Specifically, the organization invites participation as widely as possible from a board of directors, an advisory board, staff, and the general public. An executive director then distills and aggregates that democratic input with formal oversight by the board of directors, informal oversight by the advisory board and staff, and accountability to everyone. For efficiency, the board of directors provisionally grants the executive director broad discretion in running the project.
    1. [from I(I)] Basic Tenets of a CGB System. The CGB System will promote these values as its mission:
      1. Democracy
      2. Sustainability
      3. Economic justice
      4. Social and environmental responsibility
      5. Benefits everyone
      6. Regeneration (helping other communities and the planet)
      7. The common good, defined as:
        1. First and foremost, the well-being of each and every individual person, including adequate food, clothing, shelter, healthcare, education, community, satisfying work, rest, and self-determination, empowering those most in need.
        2. Second, peace and justice — a spirit of cooperation and community between all people, with compassionate sharing of the world's resources.
        3. Third, a healthy, sustainable planet, with clean air, clean water, clean earth and a healthy and diverse population of animals and plants.
    2. [from I(I)] Essential CGB System Features for an Ideal World. (The essentials for democratic economics, sustainability, and economic justice) [DETAILS]
      1. All CGB (net) profits go to serve the common good.
      2. Community divisions.
      3. Participatory budgeting for investments.
      4. Members accept some small amount of personal responsibility for those investments.
      5. Participatory budgeting for distributions of profits.
      6. Election of directors and control of other broad policy decisions by direct democracy.
      7. Internet based (self-service and automation).
      8. Merchant tithes to the community (Sales tax — with different rates for different goods and services).
      9. At least half the profits and merchant tithes are given outside the community.
      10. At least one tenth of the community's lending capital must be invested as philanthropic risk-free, interest-free (inflation-rate) loans to other community divisions at their request.
      11. Transparency / open-source.
      12. Anyone can participate.
      13. No unearned income to individuals: no more than 0% return in real terms (inflation rate), no excessive salaries or benefits.
      14. High security, including secure redundant distributed infrastructure.
      15. Communities create the money they need.
      16. Money is created as debt.
      17. Fractional reserve (or other sensible formulae for limiting how much money a community can create).
      18. Indiduals and organizations with excessive income or assets will be expected to contribute that excess to the common good.
    3. [from B] CGB Democracy. [DETAILS]
      1. General principles
        1. Each person gets one vote. All family members get a vote. Underage voters vote by proxy.
        2. You can vote directly on any issue.
        3. You assign another person as your ongoing Proxy (Representative). Whenever you don't vote, your Representative votes for you. The Representative's vote simply counts double (one vote for you and one vote for the Representative). If your Representative also fails to vote, then your Representative's Proxy votes for all three of you.
        4. You are a direct "constituent" of your Representative and an indirect constituent of your Representative's Proxy, and so forth. A popular and trusted Representative may vote on behalf of many constituents. The most trusted Representatives (those having the most constituents) meet in person to research and debate issues, as our current elected representatives do. In Common Good Bank communities, however, these trusted Representatives do not decide issues directly. They oversee the public discussions, choose the wording for questions to be voted on, and assure that all the operations of the bank advance the greater good of all.
        5. Voters discuss issues at public "threshing" sessions and on the internet.
        6. Voting begins on a certain day each week.
        7. You may change your vote any time before the voting ends, a week later.
        8. Partial results are not disclosed while the voting is open.
        9. You can vote in person or on the internet.
      2. Multiple choice questions.
        1. There must be at least three options for any issue.
        2. You grade all the options that are acceptable to you (A, B, C, D, E).
        3. The most preferred option wins. However, if the winning option is vetoed by 5% or more of the voters, then those voters are given a second opportunity to voice their objections and the issue will be reconsidered and potentially revoted, with new understanding and new options. Meanwhile, the decision stands.
      3. Penny vote (for budget-type issues).
      4. Vetos.
        1. Voters can veto any multiple choice option or budget option. If any winning option was "vetoed" by 5% or more of the voters, the Division Advisors will invite those voters to voice their objections further, and may schedule additional discussions before a revote. Meanwhile, in multiple-choice votes, the winning option stands. On budget-type issues, the vetoed item gets a zero budget.
        2. Voters are encouraged to use a veto to express moral or ethical objections to a particular option. They must give a reason for any veto.
        3. Each veto reduces the overall weight of the voter's ballot in proportion to the number of options. For example, if there are seven options, each veto reduces the voter's say by one-seventh.
    4. [from I(I)+C] Essential CGB System Features for Today's World. [DETAILS] When a feature says here "works ideally too", this is intended to mean that the feature also works sensibly for the common good in a world where all communities are Common Good Bank communities.
      1. Chartered as a stock savings bank — works ideally too, but may be discontinued when legislation enables a consolidated CGB model.
      2. Interest is charged on loans — works ideally too, but may sometime be adjusted down to (or below) 0%, whatever makes sense for each loan.
      3. CGB offers conventional accounts also (so that Common Good Accounts can default to sensible options) — to be discontinued (provisionally) when regulations change.
      4. Stock acts like deposits — at least 10% of each person's Common Good Account deposits are automatically held as stock — works ideally too.
      5. Members can formally support specific business loan applications by committing their own credit — works ideally too.
      6. Separate system for innovative financial cooperation at the community level (Depositors Association) — to be discontinued by consolidating when legislation enables a consolidated CGB model.
      7. Separate stock transfer company.
      8. Separate nonprofit.
      9. Money created by the Depositors Association acts just like other money — works ideally too.
      10. Real-time automatic information-sharing about transactions, and pre-emptive transaction requests — works ideally too, but may be discontinued when legislation enables a consolidated CGB model (no apparent need).
      11. Minimum monthly balance by depositor group — to be discontinued when legislation enables a consolidated CGB model.
      12. Exactly 0% return (in real terms) on stock — works ideally too, but may be discontinued once all money is created by CGB community divisions.
      13. Exactly half the profits are granted outside the community and half that half outside the country — works ideally too.
      14. All lending will be to individuals, businesses, and organizations in Common Good Bank communities or their immediate neighbors — works ideally too.
      15. More than one formal CGB financial institution; depositors migrate automatically if their CGB fails — works ideally too.
    5. [from I(I)+C+D] Essential CGB System Features for Rapid Growth. So that the CGB System will quickly crowd out the old system.
      1. Outsource almost everything. In the short term this includes outsourcing deposit acquisition and customer service to existing banks and especially credit unions (see by enabling them to offer Common Good Accounts in partnership with CGB. Loans will also be outsourced to diverse community-spirited lenders (possibly including banks and credit unions). All of this works ideally too.
      2. No-fee (or small fee) credit/debit card — works ideally too.
      3. Merchant rebates to customers (in addition to the community contributions) — this may be reduced or discontinued by any community division, once CGB opens.
      4. Merchants get advertising in exchange for rebates — works ideally too.
      5. Buying a controlling interest in corporations, restructuring them for sustainability and dedication to the common good — to be discontinued when all corporations are sustainable and dedicated to the common good.
      6. The Depositors Association grants an amount of negotiable credit equal to the bank's profits — works ideally too.
      7. The profits are retained as backing for that credit and are held as investments in restructuring corporations — to be discontinued when all corporations are sustainable and dedicated to the common good and all money is created by CGB community divisions.
    6. [from A+B+C+D+E] Final CGB System Design. The essential CGB system features will be realized through a system of virtual accounts. Each member will have a virtual account consisting of three component accounts: a standard bank account, a (local) mutual credit account, and a stock account. The member's effective account balance is the sum of the three component balances. [DETAILS]

      This structure will require four new organizations:
      1. Depositors Association — a formal system of financial cooperation between participants in each community. The Depositors Association will maintain two computer systems -- one for managing mutual credit and one for managing the virtual accounts. Depositors will sign a covenant with the Bank and with each other, authorizing the information sharing and automatic loans and payments necessary to make the Common Good Bank system work, following a specific set of algorithms.
      2. Stock Transfer Company — an automated system to keep track of who owns how much Common Good Bank stock and who is selling to whom.
      3. Bank — a chartered financial institution providing conventional banking services.
      4. Nonprofit Sponsor — a 501(c)(3) nonprofit. The Nonprofit Sponsor serves several critical purposes in the Common Good Bank system:
        1. Promotes the Common Good Bank model.
        2. Oversees and certifies the operations of all Common Good-type banks and Depositors Associations.
        3. Trains people to establish and run Common Good-type banks and community divisions.
        4. Provides fiscal sponsorship and administrative services to the Depositors Association and Stock Transfer Company.
    1. [from II(F)] Depositors Association Plan. Common Good Depositors Association will be an unincorporated organization. The Bank will cover the Depositors Association's costs in exchange for the Depositors Association advising the Bank on the community's investment needs and priorities, and for distributing the Bank's profits democratically (as a service to the Bank).
    2. [from II(F)] Stock Transfer Company Plan. Common Good Stock Transfer Company will be an unincorporated organization. It will be almost entirely automated. The Bank will cover computer and administrative service costs in exchange for stock transfer services.
    3. [from II(F)] Bank Plan. Common Good Bank of Massachusetts will be chartered as a Trust Company (stock savings bank), regulated by the Commonwealth of Massachusetts, the FDIC, and the SEC.
    4. [from II(F)] Nonprofit Sponsor Plan. The Nonprofit Sponsor incorporated in Massachusetts in 2006 as "Society to Benefit Everyone, Inc." and is now doing business as Common Good Finance (CGF). During the implementation phase it will play several roles:
      1. Promotes the Common Good Bank model.
      2. Plans and manages the Common Good Bank project overall.
      3. Recruits, contracts with, trains, and oversees ad hoc staff.
      4. Raises funds to finance the startup costs of the Common Good financial system.
    5. [from A] Depositors Association Documents
      1. Depositors Association Covenant.
      2. Separate contract with the Bank.
      3. Contract with Stock Transfer Company
      4. Algorithms. These formulas, referenced by the Covenant, will have some parameters that can be adjusted by depositor/owners in each community division.
    6. [from A+B+C] IT Plan. A team of qualified volunteers has been actively discussing various open-source technologies and formalizing best practices for Common Good Bank systems and operations. A formal CGB-IT Plan will be completed before the end of 2010, to guide production engineering over the course of 2011. A mature open-source web application development framework will be selected. The Apache Foundation's Opentaps and the Grameen Foundation's Mifos open source projects are examples of projects being considered for adoption. Additional team members skilled in the implementation of the chosen framework will be brought on to the project. (Once funding is available, major contributors to the CGB-IT Plan who are knowledgeable in the underlying technologies will be hired for its implementation. See N "IT Development", below.)
    7. [from C] Messaging. Effective promotion of the Common Good Bank system requires simple (not confusing) but compelling written, verbal, and visual messaging. Messaging will stress different CGB system features depending on the target audience:
      1. Everyone: CGB profits go to the common good, democratic control at the community level, anyone anywhere can participate. Our basic message is "What should get funded? It's our bank. We decide." We remind people that ownership is key: by talking about "member/owners" and "stock purchase" (rather than "investment"). We frame financial participation as philanthropy and ownership, again by avoiding words like "investment" and by focusing mostly on community-level benefits rather than personal or business benefits.
      2. Public: CGB is an internet bank with local presence, operations are transparent.
      3. Organizations and social activists: CGB profits go to nonprofits, some services may be outsourced to nonprofits, regenerative, transparent operations, no unearned income, communities can invest in themselves as needed.
      4. Businesses: CGB supports "buy local", focus on local small business lending, low-interest loans for cost-effective energy-saving improvements, possibilities for innovative local financing.
      5. Lenders: CGB will be internet-based, it will outsource lending to existing lenders, transparent operations.
    8. [from C] Funding Plan. The CGB System requires participation by thousands of people each with a personal financial stake in its success. In order to make this stake attractive, we must provide some immediate (or soon) social or personal benefit. Perversely, bank regulators require enormous advance investment, but the bank cannot provide any social or personal benefits until it opens (probably a year or more after the investments).

      We aim to raise $250k in donations to fund current operations, $1.25M in loans to fund post-charter startup costs, and $10M in initial lending capital for Common Good Bank. We will raise funds for all three stages at once by expanding and combining our current donation system with recruitment of investors in a tiered membership campaign. Membership will consist of signing a membership agreement and providing funding in all three of these ways:
      1. An unrestricted donation of $25 to $25,000.
      2. A loan of 5 times that much, to be invested short term (about one year) in low-risk community lending and ultimately in the startup of a Common Good-type bank. Members will vote on the priorities for short-term investment. Common Good Finance will pay back these loans as soon as it can (probably within two years of the bank opening).
      3. A promise to invest 8 times that much (40 times the donation amount) in a Common Good-type bank once such a bank has a charter.
      Members can choose to sign up at one of the following levels. The upper levels may come from foundations or government, building on broad popular support. Falling short on any target means we need to find about twice as many at the next level down. Funding the project only with "half bricks" would require 10,000 members.

      Gold1@$25,000 $125,000 $1,000,000
      Two Bricks2501005004,000
      One Brick500502502,000
      Half a Brick1,000251251,000
      TOTALS2,143$250,000 $1,250,000 $10,000,000

      Engagement of organizations at an early stage could expedite the membership campaign.
    9. [from C] Business Plans. See the business plan page.
    10. [from G+H] Engage Organizers. Recruit, train and support staff in promoting the Common Good Bank system effectively and recruiting members, especially in the Pioneer Valley. Begin by testing methods and materials elsewhere in the United States, in areas where we have already contracted with active division organizers. [DETAILS]
    11. [from H and/or M] Engage Organizations. Form a new project oversight committee consisting mostly of representatives of Pioneer Valley (Western Massachusetts) stakeholders. Stakeholders include lenders (both conventional and alternative) as well as economic justice, community development, and sustainability organizations. The Steering Committee will meet quarterly in person from September 2010 through October 2011, with meetings by phone or email in the between months.
    12. [from I+J+K] Promotion. Promote the project through a nationwide membership campaign concentrating on the Pioneer Valley of Western Massachusetts. Ask organizations (especially stakeholder organizations) to encourage their constituents to join. [DETAILS]
    13. [from L] Funding. The donation part of the membership fee can be used for current expenses such as staff and legal fees. The loan part will be loaned out temporarily to community lenders, in priority categories decided by the members. If necessary, we can apply for a bridge loan pending repayment of those short term investments. Any extra donations will expedite the start of IT development. Community lenders that receive investment funds during this phase will likely become more engaged in promoting the project.
    14. [from F+M] IT Development. Hire a qualified development team (as described in F "IT Plan", above) to implement the IT Plan.
    15. [from F+M+I] Charter. Once we have startup funding in hand and promises for investment at the level required by regulators, apply for (and receive) a Massachusetts charter. If this is not feasible for any reason, apply for a state charter elsewhere or for a federal charter.
    16. [from M+I] Human Systems. Hire and train executives and support staff.
    17. [from E+N+O+P+D] Launch CGB System. With permission from the FDIC, announce that the bank is open and begin accepting deposits.