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01.17 As Planet Heats Further, Even Davos Elite Warns Humanity Is 'Sleepwalking Into Catastrophe' [Intelligent government is desperately needed]
01.17 Could a Green New Deal Save Civilization? [Intelligent government is desperately needed]
01.16 Immediate fossil fuel phaseout could arrest climate change – study [Intelligent government is desperately needed]
01.15 Solar Farms Shine a Ray of Hope on Bees and Butterflies [Wonderful!]
01.14 V.A. Seeks to Redirect Billions of Dollars Into Private Care [The most public and efficient healthcare in America has been demonized and will be destroyed rather than improved, raising total per-capita costs]
01.14 Why thousands of Los Angeles teachers are going on strike [Well at least we got a big tax-cut for the super-rich, that was the most important thing.]
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01.18 Impeach Donald Trump
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01.17 White people assume niceness is the answer to racial inequality. It's not [More equality requires us to fix ignored and distorted problems]
01.16 Global tensions holding back climate change fight, says WEF [Consistently stupid and harmful policies... Seeing a pattern?]
Campaigning for State-Owned Banks
While bank bailouts fatten Wall Street, states continue to battle the credit crisis. In the search for innovative solutions, some political candidates are proposing that states generate their own credit by setting up their own banks.
Earlier published on her website on February 17th, 2010. Delay is because she's punishing us for being a less-worthy news outlet.
For over 90 years, North Dakota has demonstrated the success of the public banking model. Other credit-choked states are finally taking notice and devising their own variations on the theme.
State budgets for 2010 face the largest shortfalls on record, totaling $194 billion or 28 percent of state budgets; and 2011 is expected to be worse. Unemployment has already officially hit 10 percent, and many economists expect it to rise higher. Continued high unemployment will keep state income tax receipts at low levels and increase demand for Medicaid and other essential services states provide. The existing alternatives are spending cuts or tax increases, but both will just serve to make the downturn deeper. When states cut spending, they lay off employees, cancel contracts with vendors, eliminate or lower payments to businesses and nonprofit organizations that provide direct services, and cut benefit payments to individuals. The result is a reduction in overall demand. Tax increases also remove demand, by reducing the amount of money people have to spend.
Amanda Paulson, writing in The Christian Science Monitor, quotes Arturo Pérez, fiscal analyst with the National Conference of State Legislatures, which released its survey of state budget situations in December:
Candidates Across the Political Spectrum Pick Up on the Public Bank Model
In the quest to find ways to divorce the well-being of their states from the financial sector, a growing number of candidates are picking up on the public bank alternative. Florida, Illinois, Oregon, Massachusetts, Idaho and California all have candidates whose platforms contain this proposed solution to the credit crisis.
A publicly-owned bank has also been proposed on the federal level. Nationalizing the Federal Reserve (which is not actually federal but is owned by a consortium of private banks) was advocated by 2008 Presidential candidates Dennis Kucinich, a Democrat, and Cynthia McKinney, the Green Party candidate. In 2009, Nobel laureate Joseph Stiglitz said the government would have been better off funding a federally-owned bank than doling out trillions of dollars to private investment banks and CEOs who speculated their way into bankruptcy. Speaking at the New York Society for Ethical Culture on March 6, 2009, he said:
But nationalizing the Federal Reserve faces powerful opponents in Congress. Meanwhile, on the state level the public bank concept is gaining ground, attracting proponents across the political spectrum, including Democrats, Republicans and Greens. The issue transcends party lines. In North Dakota, a Republican state, the state-owned bank was inaugurated by a political party appropriately called the “Non-Partisan League.”
Oregon: The Bankers’ Bank Model
In Oregon, Bill Bradbury has included a state bank platform in his bid for governor. Bradbury, a Democrat, was formerly secretary of state and has been endorsed by former Vice President Al Gore. His website declares:
The Oregonian, Oregon’s largest newspaper, reported that Bradbury plans to deposit tax revenues in the public-interest bank, keeping Oregon’s money in Oregon. The bank would then lend the money to get the economy going again, targeting small and medium-sized businesses. Interest would be poured back into the state through more loans to start-up businesses, agriculture, and other key sectors. Currently, Oregon deposits hundreds of millions of dollars in tax revenues into large out-of-state banks, siphoning the money off from productive in-state uses. Many of these banks are the very banks needing federal bailouts to keep from failing in 2008, after years of handing out risky mortgage loans. These banks have now grown tight-fisted with Main Street borrowers, making Bradbury’s plan to get money flowing again especially appealing to Oregonian voters.
Bradbury uses the Bank of North Dakota (BND) as his model. Like the BND, the Bank of Oregon would return a dividend to the state based on its earnings, while creating jobs and stimulating the economy through lending. The state bank would not replace private banking institutions but would partner with them, particularly with community banks, providing them with new customers and helping them provide new services. To assure the state bank’s independence from existing financial powers, Bradbury proposes that a board of directors appointed by Oregon’s Senate should govern the bank, while taking advice from an advisory committee of experts.
Idaho: Keeping State Assets in the State
In Idaho, James Stivers, a Republican candidate for the State Senate, has also proposed a state bank to fill state coffers and protect the local economy. In the first indication of a political shift among grassroots Republicans, Stivers swept a closed-ballot preference poll at the GOP District 2 Central Committee meeting in Coeur d’Alene on February 13, winning the non-binding poll 10-0. Stivers declares:
Stivers sees the bank as a way to facilitate small business startups, end the ability of private banks to cream profits from the public treasury, protect key budget items, and stave off excessive influence from the federal government. He suggests the novel approach of expanding the role of Idaho’s Bond Bank authority into a full-fledged state bank. The current banking system, he says, causes inflation, one of the “greatest detriments to a living wage”:
Illinois: Using a State-owned Bank to Fund Infrastructure
In Illinois, Green Party gubernatorial candidate Rich Whitney has other ideas for a state-owned bank. Illinois is listed by the Pew Center for the States as one of nine states confronting historic budget problems. In a recent response to the governor’s State of the State Address, Whitney said:
The bank would use tax revenues and pension contributions as the financial base to expand credit where it is most needed. Illinois’ bank would borrow from the Federal Reserve at the same 1 percent rate as commercial banks. Once the budget was balanced, Whitney’s top priorities would be to use the new money to modernize energy infrastructure and promote solar and wind power. To achieve this, property owners of land where wind and solar generators could be located would be lent money through the state bank at a minimal 1 percent interest rate. To secure repayment, Whitney would require utilities to buy power from the solar and wind-based producers at a premium rate. One option would then be to require part of this premium to be paid to the state bank until the loan is returned. This arrangement, says Whitney, would create a win-win situation:
Florida: The Commercial Bank Model
Economist and author Farid Khavari, a Democratic gubernatorial candidate in Florida, proposes a state-owned bank that would lend directly to borrowers. The Bank of North Dakota usually uses a “lead lender” such as a bank, savings and loan company, or credit union rather than doing commercial lending directly. Dr. Khavari maintains that the Bank of the State of Florida could be launched at no cost to taxpayers by using the state’s assets as the reserves for making loans, employing the same fractional reserve lending rules used by private banks today. In this way, he says, the bank could drive an “economic miracle” in Florida, instigating massive job creation, cutting costs in half or more, providing low interest financing to homeowners and businesses, and improving teacher salaries and care for veterans and the elderly, while at the same reducing taxes. He explains:
The Federal Reserve states on its website that the banking system as a whole leverages $100 in deposits into $900 in loans, but whether a single bank can do it alone has been challenged. Critics say that while banks do create money as loans, they have to replace the deposits when the checks leave the bank in order for the checks to clear. How this all works is a bit complicated and will be the subject of another article, but suffice it to say here in response that if a bank does not have the deposits to cover its outgoing checks, it borrows from the interbank lending market at very low rates, or issues commercial paper or CDs; and the state bank could do the same thing. It would not be fighting with the other banks for old deposits. Loans create new deposits, which can be borrowed back from the pool of “excess deposits” thereby created. Ninety-seven percent of the money supply has been created by commercial banks by turning loans into deposits, but that credit machine has frozen up. A state bank could get it flowing again.
California: Catching the Wave
California leads the nation in the sheer size of its budget gap. It too now has a gubernatorial candidate proposing to alleviate the state’s credit woes with a state-owned bank. Running on the Green Party ticket, Laura Wells is a former financial analyst who received 420,000 votes in her 2002 bid for State Controller, more than any other Green Party candidate has earned in a partisan statewide race. According to her website:
She stated in a comment, “A state bank for California is part of my platform as a candidate for the Green Party nomination for Governor. I ran for State Controller to ‘Follow the Money.’ Now, we need to Fix the Money. A state bank would keep California's wealth in the state. Rather than invest in Wall Street (we've hit the wall on that one) we can invest in our infrastructure and our future generations.”
It is not just political hopefuls who are exploring the public bank option. Therese Murray currently presides over the Massachusetts State Senate. She has introduced legislation that would study the formation of a state-owned bank with the principal aim of boosting job creation in the state. Massachusetts now faces a 9.4 percent unemployment rate. “It wouldn’t be in competition with our small community banks,” she says. “We’ve got to free up some credit, and mortgage companies and banks have got to do a better job of allowing people to redo their mortgages.”
In Virginia, Congressman Bob Marshall, a Republican, introduced a bill in January to study whether to establish a bank that was owned, run, and controlled by the state. However, the plan was tabled in committee.
On February 16, the front page of the Huffington Post featured an article on the Bank of North Dakota and the precedent it sets for financially-strapped states. Besides political candidates promoting this option, it noted that a Washington State legislator and a Vermont House committee were exploring it.
North Dakota hit the Wall Street wall in 1919, when the Bank of North Dakota was established by the state legislature specifically to free farmers and small businessmen from the clutches of out-of-state bankers. For over 90 years, it has demonstrated the success of the public banking model. Other credit-choked states are finally taking notice and devising their own variations on the theme.
Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her eleven books include Forbidden Medicine, Nature's Pharmacy (co-authored with Dr. Lynne Walker), and The Key to Ultimate Health (co-authored with Dr. Richard Hansen). Her websites are www.webofdebt.com and www.ellenbrown.com, and www.public-banking.com.
Ms. Brown's stories are republished in the Baltimore Chronicle with permission of the author.
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Baltimore News Network, Inc., sponsor of this web site, is a nonprofit organization and does not make political endorsements. The opinions expressed in stories posted on this web site are the authors' own.This story was published on February 7, 2010.