PBI Newsletter, Issue: # 011
February 28th, 2012
Welcome to the PBI Newsletter, February Edition
With the addition of new bills introduced in the legislatures of Vermont, New Hampshire, and Idaho, the total number of states that have considered, or are considering, a state bank or a study for such since
2010 now numbers 17, over 1/3 of these United States, not including North Dakota, which has successfully operated a publicly owned bank for 93 years.
Granted, no state has actually implemented a state bank, but the conditions that engendered the current crisis are, as Paul Krugman recently noted, not getting any better. We would like to believe that, despite the unlimited resources of the opposition, it’s only a matter of time before a state, county, or municipality joins North Dakota in leveraging its tax revenues in the public interest.
Perhaps such a leap will be taken during this leap year? In this issue, you’ll find an overview of the current status of public banking in the U.S. by our President, Ellen Brown.
Also, as a run up to our inaugural national conference in Philadelphia, April 27-28, we’ll be featuring articles by some of the compelling thought leaders that will be presenting at the event. In this issue, Tom Greco examines effective alternatives to Federal Reserve Notes for creating economic activity in times, such as ours, when the money supply is being suppressed.
We hope you’ll join us—your friends, and colleagues—for what promises to be a memorable get together in the city that engendered the first American revolution.
PBI Newsletter Editor
Public Banking Institute
Move Our Money: New State Bank Bills Address Credit and Housing Crises
Chairman and President
Public Banking Institute
Eighteen states have now introduced bills for state-owned banks, and others are in the works. Hawaii’s innovative state bank bill addresses the foreclosure mess. County-owned banks are being proposed that would tackle the housing crisis by exercising the right of eminent domain on abandoned and foreclosed properties. Arizona has a bill that would do this for homeowners who are current in their payments but underwater, allowing them to refinance at fair market value.
The long-awaited settlement between 49 state Attorneys General and the big five robo-signing banks is proving to be a monumental disappointment before it has even been signed, sealed and court approved. It appears that the bankers who took your home and your job will again be buying their way out of jail, and the curtain will again drop on the scene of the crime.
We may not be able to beat the banks, but we don’t have to play their game. We can take our marbles and go home. The Move Your Money campaign has already prompted more than 600,000 consumers to move their funds out of Wall Street banks into local banks, and there are much larger pools that could be pulled out in the form of state revenues. States generally deposit their revenues and invest their capital with large Wall Street banks, which use those hefty sums to speculate, invest abroad, and buy up the local banks that service our communities and local economies. The states receive a modest interest, and Wall Street lends the money back at much higher interest.
Rhode Island is a case in point. In an article titled “Where Are R.I. Revenues Being Invested? Not Locally,” Kyle Hence wrote in ecoRI News on January 26th:
According to a December Treasury report, only 10 percent of Rhode Island’s short-term investments reside in truly local in-state banks, namely Washington Trust and BankRI. Meanwhile, 40 percent of these investments were placed with foreign-owned banks, including a British-government owned bank under investigation by the European Union.
Further, millions have been invested by Rhode Island in a fund created by a global buyout firm . . . . From 2008 to mid-2010, the fund lost 10 percent of its value — more than $2 million. . . . Three of four of Rhode Island’s representatives in Washington, D.C., count [this fund] amongst their top 25 political campaign donors . . . .
Are Rhode Islanders and the state economy being served well here? Is it not time for the state to more fully invest directly in Rhode Island, either through local banks more deeply rooted in the community or through the creation of a new state-owned bank?
Hence observes that state-owned banks are “[o]ne emerging solution being widely considered nationwide . . . . Since the onset of the economic collapse about five years ago, 16 states have studied or explored creating state-owned banks, according to a recent Associated Press report.”
2012 Additions to the Public Bank Movement
Make that 17 states, including three joining the list of states introducing state bank bills in 2012: Idaho (a bill for a feasibility study), New Hampshire (a bill for a bank), and Vermont (introducing THREE bills—one for a state bank study, one for a state currency, and one for a state voucher/warrant system). With North Dakota, which has had its own bank for nearly a century, that makes 18 states that have introduced bills in one form or another—36% of U.S. states. For states and text of bills, see here.
Other recent state bank developments were in Virginia, Hawaii, Washington State, and California, all of which have upgraded from bills to study the feasibility of a state-owned bank to bills to actually establish a bank. The most recent, California’s new bill, was introduced on Friday, February 24th.
All of these bills point to the Bank of North Dakota as their model. Kyle Hence notes that North Dakota has maintained a thriving economy throughout the current recession:
One of the reasons, some say, is the Bank of North Dakota, which was formed in 1919 and is the only state-owned or public bank in the United States. All state revenues flow into the Bank of North Dakota and back out into the state in the form of loans.
Since 2008, while servicing student, agricultural and energy— including wind — sector loans within North Dakota, every dollar of profit by the bank, which has added up to tens of millions, flows back into state coffers and directly supports the needs of the state in ways private banks do not.
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