Dr. Wolff, I recently spent an afternoon helping my college-student son fill out applications for student loans with Sallie Mae. Coincidentally, that evening I received an email from Sallie Mae asking if I wanted to 'receive a better interest rate for my savings.' I'm already contributing $80k from my own pocket to my son's college education, and the fact that he must borrow a further $40k is galling. But the email highlighted a troubling situation: people with money can expect a guaranteed return while my son, whether he's able to or not, must repay the money he's borrowed plus interest. I suppose theoretically the lender's interest rate has a direct relationship to the aggregate ability of borrowers to pay, but this is a future ability to pay and impossible to predict. Is there some way (co-op banks?) that a lender's eventual return could be directly linked to the borrower's eventual ability to repay?
There already exist plenty of precedents and models that link a lender's rate of return to a borrower's rate of return using the borrowed money. This is an old idea of shared risk that often accompanies shared gain as when a nominal interest rate attached to a loan can be raised or lowered depending on the results of the borrower's investments made with the borrowed money. Of course, a certain sharing of risk has always been part of most loans since a borrower's possible default on a loan would impose shared risk on the lender.
A coop bank could work out various shared-risk-shared reward arrangement - and likely would do that much more readily than atypical capitalist bank. That's because the cooperation between borrower and lender follows from the cooperation in a worker coop among the different types of workers contributing to the final output.