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Adventures in Nationalization with the Central Bank of North Dakota
Crony Capitalist tendencies do not discriminate with respect to "side of the aisle." The left has been as busily handing out delicious treats to its favored students as the right. Tacking on a reverse bill of attainder cleverly (or not so cleverly) disguised in prose designed to deter key word searches and in order to slip cash to a friend of a friend is as American as reality shows. Accordingly, the somber faces of Zero Hedge readers should register exactly no surprise whatsoever on learning that the Health Care Swill harbors a series of such glory hole surprises.
Consider this gem:
SEC. 460A. AGREEMENTS WITH STATE-OWNED BANKS.
(a) DEFINITION OF ELIGIBLE LENDER.—In this section, the term ‘eligible lender’ means a lender that, on July 1, 2009, was and continues to be—
(1) a bank, the deposits of which are guaranteed by a State;
(2) owned by the State in which the lender is located;
(3) under the control of a board of directors that includes the Governor of the State; and
(4) an originator or holder of loans made under the program under part B, as such part was in effect on July 1, 2009.(b) AGREEMENTS.—
(1) IN GENERAL.—At the request of a State in which an eligible lender is located, the Secretary shall enter into an agreement with the eligible lender under which—'
(A) the eligible lender agrees to provide student loans to borrowers in accordance with this section; and(B) the Secretary agrees to provide Federal loan insurance on the student loans made under this section by that eligible lender....
The Rules Committee summary characterizes this lyrical prose thus:
Section 2213. Agreements with State-Owned Banks. This section amends Part D of Title IV to direct the Secretary to enter into an agreement with an eligible lender for the purpose of providing Federal loan insurance on student loans made by state-owned banks.
Of course, the reality is a bit more complex. In fact, other than the Puerto Rico Government Development Bank, the only "state" owned bank in the United States is the Bank of North Dakota. Since it is somewhat difficult to squeeze the PRGDB into the definition "a bank, the deposits of which are guaranteed by a State," it is pretty clear that this provision is tailor made to apply only to the state owned bank that was a state owned bank on July 1, 2009. In other words, the Bank of North Dakota.
How to Nationalize an Industry Without Nationalizing an Industry
Taking a step back, the Obama administration has long desired to nationalize the student loan business. Nationalizing it outright would require legislation somehow forbidding private lenders from issuing loans to students, or forbidding schools from accepting the proceeds of such loans. This approach, obviously, would require an absurdly tortured constitutional construction and would be highly unlikely to survive even the most rudimentary challenge. However, distorting the market via price fixing accomplishes the goal nicely. Specifically, limiting generous federal guarantees to "eligible lenders" places those entities in a vastly superior position competitively. The risk of default is shifted directly to the taxpayer and the "eligible lender" is able to out-price all comers when it comes to rates. This effectively means that the taxpayers are being used to price-fix private lenders out of the student loan business. Congratulations taxpayers!
The Bank of North Dakota is a curious beast. All state agencies and appendages are required to deposits their funds at the bank, giving it a captive depositor base. All tax collections and fees are also deposited with the bank, which amounts to an interest free loan to the bank by taxpayers in the amount of any pending refunds. The state treasury can adjust this dial at will by modifying the amount of withholding. Of course, taxpayers will be pleased to learn that profits on their interest free loans to the state are funneled back into the general fund to increase the amount North Dakota spends on... well, whatever it wants. In addition, the bank makes loans to state agencies and appendages authorized (read: mandated) by statute, permitting a rather recursive bit of factoring by the entire state government without even a hint of underwriting diligence. The bank itself was created in a near populist uprising in 1919 by farmers tired of eastern whipper-snappers and their underwriting standards and played a central part of a then byzantine foreclosure process that effectively made it impossible to foreclose on a farm in North Dakota. No foreclosure means no loans in most circumstances, unless you have a captive bank mandated by statute to be the lender of only resort, that is.
As one might easily guess, the bank also lends based on the political dictates of North Dakota and plays a key role in permitting the state government to command and control the local economy via selective lending. Obscured as it may be, the bank is actually just another tax on North Dakota citizens, and is just a dividend to the general fund away from supplementing the state budget with bailout money when things start to go south. Of course, it also helps when you are running as a wholesale bank and processing most of the payments through and in North Dakota for those private sector banks that service the state and acting as a market maker in the secondary market for residential loans.
No surprise at all then that the somewhat parasitic Bank of North Dakota would find friends in a democratic congress to throw it a particular bone, hidden, as it were, in the thick syrup of the Health Care Morass. Less surprise still when you notice that Senator Kent Conrad (D-ND) is Chairman of the Committee on Budget.
In our view there is no stronger argument against permitting centralized control of industries, particularly finance, than the dynamic aptly demonstrated by the Bank of North Dakota gambit. So long as government, state or otherwise, is permitted to translate political desire into market manipulation this sort of cronyism threatens. This bit of shabby dealing is only possible because the United States has permitted the federal government to distort student loan pricing for decades and, not satisfied with guarantee programs, is now moving to be the exclusive provider of student loans in the country. (Oh, except for the Bank of North Dakota). Likewise, it only becomes possible to trample more than a century of bankruptcy priority jurisprudence when the government has 70-80% of the major creditors in, say, Chrysler by the short hairs via TARP. Look no further than the fact that credit default swaps on mortgage backed securities (favored by the regulators to boost the housing market) permitted banks to half their reserve requirement on those assets to understand why credit default swaps were allowed to garner nearly unlimited leverage. Likewise, one can only continue to inflate a dangerous real estate bubble when the instrumentalities required to price fix $3 trillion in mortgage loans are in the hands of the Barney Franks of the world. (And, by the way, if FNM and FRE didn't cause the first bubble, why is the current administration convinced it can used them and the FHA to inflate this one?)
In the end capturing lending sectors that represent over 40% of the nation's economy accomplishes two things:
First, the ability to disregard underwriting in favor of loans to this week's favored political class or pet project.
Second, the creation of a significant body of subjects (to be distinguished from Citizens) beholden to the state. Is it any wonder that health care, insurance and energy are next on the list?
We don't really wonder what will be de facto nationalized next. We wonder what is actually going to be left to nationalize. The latter seems quickly becoming the smaller list.
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thats where you've been, you read the whole HCR bill. we've missed you. :)
MARLA's BACK !!!!!!!!!!
Hey Hun - Wher'ya Been??
WE Have Missed You!!!
But what if "Hun" is actually a 52 year old bald guy with obesity issues? Will you still miss her then?
P.s Excellent piece.
..or worse for these gold bugs:
she's a total oberman/maddow liberal luving lesbo socialist?... they'd still jerk off to her
"But what if "Hun" is actually a 52 year old bald guy with obesity issues"
LOL. You just sent everybody except Barney Frank into erectile dysfunction land...
First, glad to see you're still around and at it!
We are at war in America. The masses think it's about Rep/Dem, and petty things like health care, but it's much deeper. This is for our very principles as a people. Anyone who attempts to trample what the founders blessed us with must be put down in the swiftest of manner. ZH serves as daily inspiration for me in this. Hopefully we can get some rational people in office this fall before the social contract goes out the window and this whole thing explodes.
I think you have unintentionally pinpointed the major problem we have in America. Americans as a people no longer have principles. Where once was principle, all that remains is emotion. Emotion is completely irrational and thus we get things like "We demand free healthcare!" as well as "We demand fewer taxes!" Of course these two things are mutually exclusive, but no politicians have to guts to say that.
well i reckon they arent mutually scvlusive - the US CAN have fewer taxes and better healthcare.
of course, it would mean slashing your obese military budget......
+1
Scary shit.
And who might the paid directors be? Be a nice scratch and sniff, eh?
a series of such glory hole surprises
oh. my. god. marla. i missed you sooo much!
yes, the corporations have taken over. it's been a coup d'etat with the help of the elected politicians. upsetting and sad but we must not give up.
isn't it ridiculous that most people are brainwashed to think that everyone should go to college!? what a waste of time and money for most. when they graduate there is no job and $100,000 of student loans to be paid back (that can't be wiped out in bankruptcy). it's just one more way to create a debt slave.
.
If you treat college as a glorified vocational school instead of a institution of learning, then the money can be well spent.
just use it to get to know people... everyone knows these days we all do our work with google searches.. even surgeons
Beautiful! I love government ran everything! You should watch this video to get a real sense of what is going on. It is Jonathan Gruber, co-writer of the MA health care bill and the Federal version being voted on tomorrow. This has never been shown on national TV, except C-SPAN, I saw it laqst night
http://www.c-spanvideo.org/program/292478-1
it is an hour and 23 minutes, but it is real info on this thing, not talking points. It does skip most of the bill details, but listen to what he says, how he says it and what he leaves out. It doe snot take a rocket scientist to figure out what is going on. He starts out by saying we will never have nationalized health care, but if the government breaks the system we have now, we will.
Progressive party spew, what an ass clown.
"No surprise at all then that the somewhat parasitic Bank of North Dakota would find friends in a democratic congress to throw it a particular bone, hidden, as it were, in the thick syrup of the Health Care Morass. Less surprise still when you notice that Senator Kent Conrad (D-ND) is Chairman of the Committee on Budget."
They must think no one reads these bills. And they'd be right for the most part.
I'm a bit confused, is that parasitic Bank of N.Dakota paying also billions of $$$ to their top employees? Do they move their profits back to state, which spends it on whatever it wants? Something wrong here I'm used to be milked both ways, by state and banks.
Eally,
I'm confused too. ND has done what Andrew Jackson did. Defied the money center banks. So they're scamming DC a little with their independence [and its resulting influence]. If all states had their own central bank, would the FRBNY have control? The larger and more distant a govt unit is, the harder to keep it honest. Ron Paul The Great reminds us that a state has the right to secede. The States have the Constitutional right to control DC and not the other way around. Lincoln notwithstanding, the States have never lost the power to secede. Since God gave us our freedoms, no group of pimps can take them. May our fellow citizens wise the uck up!
actually 3 states specifically reserved the right to secede in return for a yay at the constitutional convention -- NY, RI, VA.
this is a nice quote: Henry Cabot Lodge writes, "It is safe to say that there was not a man in the country, from Washington and Hamilton to Clinton and Mason, who did not regard the new system as an experiment from which each and every State had a right to peaceably withdraw."
MARLA!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
We missed ya'.
is it just me or does this bury the nebraska and lousiana bribes?
I'm sure this deal has nothing to do with the fact that Earl Pomery, ND's lone congressman is was "undecided" on the health care bill.
WELCOME BACK, MARLA BABY!
The health care bill has more pork than a Carolina BBQ.
The government will nationalize every industry if we let them, comrades. Goodbye unemployment, hello bread lines.
Viva la revolution! Gold, bitches!
Government guaranteed student loans is the reason that the cost of a college education has risen so fast, faster even than health care. It's also the reason America has to many liberal arts majors and not enough hard science graduates.
Agreed. At least 80% of those liberal arts majors should have never gone to college in the first place, talk about a misallocation of capital haha. Colleges have become degree factories, making a baccalaureate degree expensive and worthless.
mock what ye don't understand... but there is a place for your kind too.. like the worms that dig in the ground away from the inspiring foliage they help support but never appreciate
Truth.
The WSJ did a story almost a year ago. The basic premise is that if you looked at college degrees as an investment/business plan, most degrees would fail outright. They advocated 2yr job vocational for working skillsets. Only a few degrees like engineering and such made sense as 4 year degrees.
Cooter
"If you want to get laid, go to college. If you want an education, go to the library." - Frank Zappa
The youth doesn't stand a chance against the apathy inducing, intellectually draining propaganda arm of TPTB. Who needs hard science when you can be an American Idol, or become a celebrity by having 8 children and getting divorced? And if, by some odd chance, those paths don't pan out, well hey, Uncle Barry's got your back.
I thought blockhead had run you off.
This North Dakota thing should explode in July now that the fuse has been lit.
Marla's back, thank goodness. Now if only Mahem would return and if Cheeky's posts wouldn't get deleted it would be like the good ol' days
Damn, this State Bank of North Dakota sounds worse than Wall Street.
That's the funniest shit I've heard all day.
Do you now have sponsorship?
I'm not so sure I object to any state's (of the 50 USA that is) ability to pass outrageous, oppressive or unfair statutes, regulations and the like. If one state's experiment with centralized control of a particular industry (for instance) proves too burdensome...business will flow over the borders to neighboring and/or more business friendly states....as The Economist maxim dictates...and lessons will thus be learned.
Hopefully, the federal government will observe what works and what doesn't and legislate accordingly. 'Hopefully' here means that the system operates as intended: that federal policy makers are incentivized to take notice of what has worked and what hasn't in the laboratories of the states and act accordingly when crafting national policies.
Today California has set for itself a number of unsustainable and unrealistic objectives. As a result the S has HTF in a number of ways...most obviously evidenced by a great number of productive, tax generating residents leaving CA for more business friendly Texas. This is how it should be and a more perfect example of the 'Invisible Hand' rendering it's verdict there never has been.
BUT...when the federal government starts swinging for the fences on some all-enompasing, "for the greater good" type project...however well intentioned... eyebrows should be raised because citizens can't vote themselves and their business over the border in quite the same way.
If the national electorate were to at some point vote into office -under duress of a crisis perhaps- a chief executive dedicated to the fundamental and permanent restructuring of government and society on all levels...whose actions were somehow not dictated by the kinds of incentives that motivate rational actors....Then, that might be a problem...
But normally, if one state, like North Dakota, does something crazy like this it can have the positive effect of serving as a cautionary tale and provide a bulwark against federal dominance.
Apparently, this bank is a key cog in the Student Ponzi Loan Machine.....
No wonder they are now government-owned.
Eh, government founded--not that long after the FRB Act sealed the full capture of the rest of the US population as "customers."
Really think I'd rather have taken my chances with the State model.
We should keep on eye on that student loan risk, however.
Thanks Marla. We already know who pays. Now we’re finding out who gets paid.
It’s not the staff members of House Democrats, or the arm-twisting from Rahm or even the phone calls from constituents that are driving this health care bill through to passage. Instead, it is the full force of threat and power of the banking lobby and the other corporate power lobbyists such as insurance companies and pharmaceuticals.
It’s been said that most all subjects relate to politics. But it’s also true that almost all subjects relate to economics; man working to provide for himself, his family and his future. The heath care bill, of course, is political, but more than anything, it is economic. And following right behind health care in the Obama Administration’s political agenda is another major economic issue—immigration.
This letter I received on email is a bit frightening and long but it is nothing if not economics.
CHEAP TOMATOES? | From a California school teacher - - -
As you listen to the news about the student protests over illegal immigration, there are some things that you should be aware of:
I am in charge of the English-as-a-second-language department at a large southern California high school which is designated a Title 1 school, meaning that its students average lower socioeconomic and income levels.
Most of the schools you are hearing about, South Gate High, Bell Gardens, Huntington Park, etc., where these students are protesting, are also Title 1 schools.
Title 1 schools are on the free breakfast and free lunch program. When I say free breakfast, I'm not talking a glass of milk and roll, but a full breakfast and cereal bar with fruits and juices that would make a Marriott proud. The waste of this food is monumental, with trays and trays of it being dumped in the trash uneaten.
I estimate that well over 50% of these students are obese or at least moderately overweight. About 75% or more have cell phones.
The school also provides day care centers for the unwed teenage pregnant girls (some as young as 13) so they can attend class without the inconvenience of having to arrange for babysitters or having family watch their kids.
I was ordered to spend $700,000 on my department or risk losing funding for the upcoming year even though there was little need for anything; my budget was already substantial. I ended up buying new computers for the computer-learning center, half of which, one month later, have been carved with graffiti…
I have had to intervene several times for young and substitute teachers whose classes consist of many illegal immigrant students here in the country less than 3 months who raised so much hell with the female teachers, calling them 'Putas' (whores) and throwing things, that the teachers were in tears.
Free medical, free education, free food, day care etc., etc., etc.
To those who want to point out how much illegal immigrants contribute to our society because they like their gardener and housekeeper and they like to pay less for tomatoes: spend some time in the real world of illegal immigration and see the true costs. Higher insurance, medical facilities closing, higher medical costs, more crime, lower standards of education in our schools, over crowding, new diseases etc., etc., etc.
We need to wake up. The guest worker program will be a disaster because we won't enforce it. Does anyone really think guest workers will voluntarily leave and return?
It does, however, have everything to do with culture: A third-world culture that does not value education, that accepts children getting pregnant and dropping out of school by 15 and that refuses to assimilate, and an American culture that has become so weak and worried about 'political correctness' that it doesn't have the will to do anything about it.
CHEAP LABOR? Isn't that what the whole immigration issue is about?
Business doesn't want to pay a decent wage.
Consumers don't want expensive produce.
Government will tell you Americans don't want the jobs.
But the bottom line is cheap labor.
The phrase 'cheap labor' is a myth, a farce, and a lie. There is no such thing as 'cheap labor’.
Take, for example, an illegal alien with a wife and five children. He takes a job for $5.00 or $6.00/hour. At that wage, with six dependents, he pays no income tax, yet at the end of the year, if he files an Income Tax Return, he gets an 'earned income credit' of up to $3,200 free.
He qualifies for Section 8 housing and subsidized rent.
He qualifies for food stamps.
He qualifies for free (no deductible, no co-pay) health care.
His children get free breakfasts and lunches at school.
He requires bilingual teachers and books.
He qualifies for relief from high-energy bills.
If they are or become, aged, blind or disabled, they qualify for SSI.
Once qualified for SSI they can qualify for Medicare.
All of this is at taxpayers’ expense.
He doesn't worry about car insurance, life insurance, or homeowners
insurance.
Taxpayers provide Spanish language signs, bulletins and printed material.
He and his family receive the equivalent of $20.00 to $30.00/hour in benefits.
Cheap labor? I don't think so.
gee, is that for real? no wonder CA is completely broke. I know CA has bilingual program, and they have all kinds of signs and printed materials for everything. They need to seriously get their acts together. do you think the federal gov. will bail out CA? I hope not. if it does, I think this country is completely lost.
Yes, that is for real, and duplicated in counties all over California. Add to that extra police, highway patrol, crime statistics (terrorist street gangs (California Penal Code §186.22) abound) that include coroners, lawyers, investigators, interpreters, prosecutors, judge's time, court reporters time, jail facilities including staff and more food; various social service workers; and more in nearly every area of life, including litter on hiways — chairs, sinks, sofas, mattresses. Illegals and others who don't assimilate work on their cars on the streets and pour the engine oil into the gutters instead of disposing properly, and generally, degrade life to hellish conditions in all facets of living.
That is not just California where thatat is happening, it is happening all across the country. Texas has some of the same programs/problems.
Cheap labor is not cheap.
I think this letter is vital to the debate. It is the reality of the spending portion of the fucked up fiscal deficit. California does have its own methods for passing laws and issuing iou's but this expose (ay)is a fantastic representation of the flip side of the broken system. There is a need for a better democracy, that is, one that is real and lives within the proper costing of social programs. It should be clear to all that any Health Care bill will have unintended consequences that Governments can't control or predict. Thi goes for any government program. Corruption (or free lunches for fat kids) is the same no matter where it lies. The same applies to the FBI and the Pentagon. Each will bleed taxes (read your standard of living) far in excess of the utility provided and we are moving from the realm of unintended consequences to intended ones. Both are detroying wealth and well being and choice. Again, most excellent contribution to the debate to end the corruption and waste of the current status quo.
Weird, I was just searching the interwebs for the full text of the bloated, rotting, pork addled excuse for a "health" care bill when lo and behold Ms. Singer resurfaces with some knowledge. I love this place.
Geeze I don't understand all the fuss over Fannie and Freddie. Thanks to the generous Christmas Eve gift bestowed upon us Great Unwashed Masses, they can now use their (negative) $15B quarterly earnings to make one of the smartest investments possible: buying mortgages which are over 4 months late.
Even better, through magic, skittle-shitting-unicorn accounting techniques, they will actually be able to use their -$15B cash to buy nearly $150B in delinquent loans in the next few months alone (http://www.businessweek.com/news/2010-03-19/fannie-mae-boosts-estimate-f...):
Even an econo-novice such as myself can see the sheer brilliance in such an epic investment strategy. But I'm not too envious, since lowly I will be the beneficiary of artificially propped-up housing prices as I look to purchase my small part of the American Dream. And knowing that I, through my meager tax contributions, am able to ensure that I am allowed to pay many thousands more at the time of purchase makes all those years of saving worth every minute.
Personally, I can't wait to see how I will benefit by having gov't take over student loans. As a start, I can imagine a much greater pool of loans for students seeking to address critical issues such as global climate change. Can you imagine a world where the temperature is maintained at a constant 72F, year round until eternity?
See also:
http://www.businessweek.com/news/2010-02-11/fannie-mae-freddie-mac-loan-...
Who’s going to pay for Obama Healthcare?:
The Middle Class Two Income Trap—Two Breadwinners plus Extra Money to support the Banking Industry. How Middle Class Americans are Losing Ground by Supporting the Financial Sector. | My Budget 360 (see link for charts)
If it isn’t enough that average Americans are contending with the rising cost of healthcare, education, and daily necessities like food now additional funds are going directly to the banking sector to keep them propped up like a money loving puppet. Since the Great Depression the rise of the middle class has been the envy of many people around the globe. The ability for hard working Americans to have access to an economy that supported them so long as they worked hard and followed an implicit guarantee with their nation. With this implicit guarantee it was assumed that the government would also protect people to a certain degree especially when it came to their financial well being. This did not assure a winning portfolio but it did mean we wouldn’t turn our stock market into a giant game of casino where the connected had a loaded deck. Much of the strong regulatory arm that came from the Great Depression was because of the speculative gambling during the Roaring 1920s. Yet as time went on slowly Wall Street took these structures away and now we are finding ourselves once again with the middle class largely at risk in the United States. It isn’t by accident we are in the situation we are in today.
The first important thing to understand is that yes, the income of middle class families has gone up since the 1950s but a large part of this was the rise of the two income households with women entering the workforce: (chart)
The above chart is disturbing in many ways because it bucks the nearly 50 year long-term trend of employment. Now, even with two income households many with rising job losses are finding they now have to make it with one income while inflation has eroded their buying power over the decades. In this recession 3 out of 4 job losses have been men. If you have any doubt regarding the insidious nature of inflation I put together a chart looking at various costs over the last few decades: (chart)
Part of this is due to the Federal Reserve and U.S. Treasury trashing the U.S. dollar over the decades. For example, in 1950 it took the median household income (which was largely a one income household) about 2 times the annual household income to purchase the median priced home. In 2008, it took the median household income (now largely a two income household) four times annual earnings to purchase the median priced home. In fact, the two income household has hidden a large part of how much the middle class has fallen behind in this country. Now with this recession, the deep cracks are now being exposed in the system.
Income inequality has also risen in this country and a large part of it is due to the financial sector. 1 percent of our population control 42 percent of all financial wealth. In fact, in the last decade the only segment of our population that has seen any sizeable gains in true wealth is the top 1 percent. Every other category has seen a loss of housing net worth, wage stagnation, and higher costs for daily items that consume a larger part of their budget. Just take a look at the chart below showing this change: (chart)
The above is looking at a one income household in 1973 versus the two income household in the 2000s. It is interesting to note that in the 1970s Nixon took the dollar into a purely fiat system and since that time, the dollar has lost much of its actual value. This would be expected. The Federal Reserve with its banking lieutenants has been able to put our country so deep into debt that realistically we are in a position of never paying back all our outstanding obligations. The only way out is via inflation and with a fiat system that is the path we are heading down. This is important because when you look at the charts above prices rise for various reasons and inflation is a hidden tax. No need for higher taxes to bailout the banking sector when you can just destroy the purchasing power of middle class Americans by monetizing enormous amounts of debt as we have done.
That is why in the next decade, Americans are now working for someone else beyond their immediate household. A large chunk of their money is now going to the banking sector. This can be in absurd payments to credit card companies, loss of purchasing power because of the Fed, or other hidden methods of taxing the public. We are really at a crossroads for the middle class. If we dissect the data further we realize that even though things cost more, much of it has been financed through debt: (chart)
Ironically the family in the early 1970s had more discretionary income than the family in the early 2000s even with a dual income. Yet if you look around, it isn’t immediately apparent because of the massive debt bubble financed by the banking sector. Sure people bought bigger homes and newer cars but all this was under a phony veneer of success and was financed with debt. All of it was built around a mountain of debt. Yet here is where the big divide hits. Middle class families are now losing their homes through foreclosure. Many are having their cars repossessed because they can’t make their payments. Bankruptcy filings are soaring because people cannot service their debt. So middle class Americans are paying the price with the rules that are setup. Yet banks are not. They are sucking the American taxpayer for all their horrible bets and are not dealing with the ramifications of their actions. In other words, the bill is going to the middle class as the middle class is dealing with their own bad decisions. This is part of the system built around the corporatacracy model of government. Losses are socialized while gains are privatized.
And don’t kid yourself, this entire game was financed on debt: (chart)
And the small group of banks at the top now control a large portion of all FDIC backed assets in our country: (chart Source: FDIC, Bank Financial Statements)
Forget about the Republican or Democrat parties, we are being governed by the financial sector of this economy. It is amazing how hard it is to get sensible legislation even after this great calamity. To prove this point, in California an insurance company announced they are hiking healthcare premiums by 30 percent in the midst of this recession even though they pulled in billions in profits. The government will sit back and let the middle class get fleeced because they are part of the problem. They speak a good game but are bought by the industry. Prove us wrong if this isn’t the case. Enough talk, time for action. From now on we need to focus on who is delivering results. If you can, take you money out of the big banks and put them in local regional banks. Let your local representatives know that their number one priority should be focusing on protecting our struggling middle class. Time to get some real reform or we really risk losing our middle class. (emphases mine)
http://www.mybudget360.com/the-middle-class-two-income-trap-%e2%80%93-tw...
another reality check! i think the more you dig into the type of work of the dual income families the more you will see its in reality tv, haircuts, burgers and wally world outlets too. That is work that has no value only mutual "cave dwelling" with the food being captured by fewer and fewer hunters or by debt. Certainly not by precision engineering, relecoms, tehcnology, other inventions, etc, these facets have been delegated to asia or for cheap slave labour to places like India. The manufacturing sector (aside from a few pockets of excellence like military technology (co-developed with israelis and koreans/taiwanese) has been overtaken. This is the effect of poorly administered/policed corrupt democratic processes. The middle class represents people who are now distributing manufactured plastic buckets, not designing bridges/dams etc because of the diversion of tax payer funds over decades to promoting a semi-rotating monarchy based on protected permanent earls, dukes and barons who are above the law.
Who’s going to pay for Obama Healthcare?
The Forgotten Man...and Woman...and Child...and Child's Child...
It's so good to see Marla back!
Here's my thought for today: We will beat these Washington, D.C. communists the same way we beat the Moscow communists--when they run out of money. As soon as they run out of money, they are toast--and they know it.
Default day will be the start of a new rebirth of freedom upon this continent.
Yeah - the same way you beat those Chinese Communists - by handing them the keys to the farm.
Welcome back Marla, you hot little avatar number, you.
I live in DC and checked out the Kill the Bill Rally at the US Capitol today. I've posted some crappy videos on YouTube. Here is one:
http://www.youtube.com/watch?v=sOAO9rSkBQw
I believe that reps who vote for this bill truly will face voter wrath in November. This issue of gubmint intrusiveness/expansion/nannyism/bailouts/corruption is going to be around for years to come. The Mother of All Culture Wars has begun:
http://www.nypost.com/p/news/national/why_we_fear_bam_big_gov_zFBhU4Fkgi...
“Crappy”? Horseblinkers! It’s potent! a vignette of the will of the people. The “power of the people,”as you so apply prove, lies in the power of information brought to the Internet by soldiers in the field, such as you, to counteract the misinformation brought by the MSM. Well done, YesWeCan.
There is little free speech in the gray pages of America’s monopoly-controlled media. Nor was there free speech in Lenin’s cold-blooded Communist revolutionary state. Said Lenin: “The press should be not only a collective propagandist and a collective agitator, but also a collective organizer of the masses.” He added, “He who now talks about the ‘freedom of the press’ goes backward, and halts our headlong course towards Socialism.”
Years ago the half blind, half crippled leader of the Taliban, Mullah Omar (famous from the George Bush press conference, "you can run, but you cannot hide....{whispers in Bush's ear}...I mean, you can hide, but you cannot run") said that the US would destroy itself in the next few years and go bankrupt, thus al Qaeda only needed to sit back and wait it out.
After the last two years---with all the bailouts and money lavished on the folks who are the source of the problem, and now the kind of things Marla notes here---I now realize why we have not suffered another domestic terrorist attack since 9-11 (truthers nowithstanding). Al Qaeda knows very well that we will destroy ourselves without any help from anyone else.
I bet right now Ayman al Zawahri, Mullah Omar, and Osama have set up an office pool guessing the day and month America either defaults or erupts into a full fledged revolution. Hopefully, we'll do the latter before the former.
You bet.
The guessing game is over at Intrade but they can't muster enough counterparty bets to make it worth their while.
Welcome back, your eminencette.
Welcome back, your eminencette.
It is only thanks to ZH that I have come to learn how thoroughly corrupt and rotten so many areas of American society really are.
Thank you.
Um.... while understanding the role of Marla to be the 'foil', im a bit surprised at ZH being so savage with the bank of NDakota.
Isnt North Dakota virtually the only US state that is not effectively trading/governing insolvent courtesy of its state bank model? While there may be a little nauseating pork-barrelling going on with this HC bill's favouratism, I think ZH should be reminding its readers loudly that NK's banking model is effective, working, and a remedy that should be mimicked by all other states. And no i dont live ther eor have shares in the stupid thing.
Indeed. ZH will surprise you, on some issues with monotonous consistency, e.g., the "socialism" issue, as if they cannot wrap their heads around the difference between a fascist corptocracy and a socialist model. Perhaps one day they'll do a piece dealing with that issue head on in a meaninfully substantive and coherent way.
This strikes me as another illustration of this misguided bias.
Oh the horror.... issuing student loans without a profit motive?
Reducing the barrier to entry to higher education through lower costs?
Surely the gulags must be next
precisely, +1
education is an essential service. essential services should be govt controlled and subsidised. non essential services? let em be as free market as they wanna be, but if you start pricing the lower and middle class outta education and all you get is exacerbated class divide = depleted talent pools = atrophied innovation = disparity of wealth = collapse in the consumer economy = today's america.
We awake yet? socialism isnt evil. Capitalism isnt evil. A functioning, sustainable society needs to keep both these forces in balance. September 2008 was the peak of excess capitalism. The knee jerk govt reaction, depressingly predictable, was excess communism (and poorly targeted at that).
"We awake yet? socialism isnt evil. Capitalism isnt evil. A functioning, sustainable society needs to keep both these forces in balance."
+1
However....
Bankers, oligarchs, and corporations "owning the country", and subverting/corrupting the Peoples' right to representation IS evil (or at the very least tyrannanical).
A "sustainable" society needs, and has, the reality of equal justice under the law.
Let's have this conversation after the revolution when we are reforming our fair republic, shall we?
How is there anything sustainable about socialism?
You're right. Let's let the old, sick, poor, and young just die. Why support them, right? Fuck'em. Who cares about the right to life? Let's just go with a right to liberty and the pursuit of happiness, shall we? Old people over the cliff at 65? Does that suit you? Also, I am so down with for profit energy, medicine, banking, and utilities.... The results have been SPECTACULAR.
You are being obtuse, sir.
A well run society should have a floor which it will not let its citizens fall below, but be free of a ceiling where any height is attainable to those willing to reach for the heavens.
Thought, free from talking points and cliches, is a beautiful thing; you should try it some time.
PS I guess you find the idea of Congress being responsible for monetary creation and policy for the good of the republic to be a wild idea too? (As opposed to the Fed/banking conglomerate united) Hmmm? Yeah, the F'ing Constitution and Declaration of Independence is SO out there, am I right?
Keith-
Is that you? I recommend Reading von Hayak's "Road to Serfdom" it will help you understand the opposition most here have to socialism.
That being said, what we have in the USA is socialism where wealth is transferred through taxes to industries that would become efficient if they actually had to compete (just look at a hospital and try to figure out where they get their money from.) There is nothing wrong with social security or even national health care, provided it isn't some hibrid system that rewards bad business with socialsm.
It's not socialism. Get a life.
I disagree. Capitalism is inherently evil. You can try to keep it in check, but that has now failed several times. Or you can simply do away with it.
Socialism hasn't been tried yet anywhere on this planet, so it cannot be said to have failed.
Unfortunately for you poor Americans (but soon the rest of the world, will follow), what you (and we) are facing is not socialism, it's corporatism. Government modelled on China, because it works better(tm).
Yes, I forgot Socialism is only Socialism if it works splendidly.
If Obama screws us all into the stone age college kids will still sit around on couches talking about what a hero He was and how true Obamunism was never put into practice because (those evil Republicans, global warming, thermodynamics etc.) prevented His Will from being done...but, you know, that doesn't prove Obamunism doesn't work...just the opposite in fact.
No, honestly. You missed my point entirely. Obama is not a socialist, he is corporatist and I am also not defending him in any way.
I hope you can appreciate the difference.
Perhaps, but at some level it doesn't matter if your's is the wealth that is intended to be redistributed.
Giant corporations aren't so keen on markets being too free as one guy in a garage with a better musetrap can ruin their whole business model. Partnering with government to throw up artifical barriers to competition is usually the preffered tactic. When a government interested in doing BIG THINGS understands this...it's quid pro quo time.
This has happened in the US at various times but there have also been times when the courts, state governments etc. have empowered the "little guys" before things got too out of whack. Maybe not this time.
Also when a socialist government partners at the hip with large corporations as happened in Italy and Germany in the '30's - that's called fascism. Somehow, when socialist governments turn ugly they get renamed "right wing" in the history books.
I mostly agree. However, Germany and Italy were not socialist at any time. The Germans called themselves National Socialists, but that doesn't mean much. Sometimes names are used to deceive.
I think A. Lincoln put it this way:
If you call the dog's tail a leg, how many legs does the dog have?
Still four. Just calling a tail a leg doesn't make it a leg.
That's ridiculous. American and European socialists post-WWI through the 30's all hung out together, read each other's books and admired each others achievements, The communists were more internationally oriented -viral revolution covering the globe and all that- national socialists were more focused on their own country, ethnicity, culture, history etc. But it was (still is) all the same schtick - centralized control and everyone pulling for the "greater good" as defined by government experts.
To all fruitcakes above who think they have the right to take a producers money and give it to themselves in whatever form be it "free" education, medical care, old age benefits, and any other so-called "botttom" which no one be premitted to fall through the old:
From each according to his abilities, to each according the their needs, wants, desires, conveniences, luxuries, and whims:
Go fuck yourselves. I really don't give one good goddamn if you you are stick, can't add two and two, and starve in the dark.
Don't hold back anony... tell us what you really think.
"To all fruitcakes above who think they have the right to take a producers money and give it to themselves in whatever form be it..."
Okay anony, let us walk the walk:
1. Don't call socialized police for help when you get robbed or cornholed...
2. Don't be driving your car on the public roads since we tax payers pay $120 billion annually maintaining roads nationwide.
3. Don't use any airports as they are maintained at government expense by taxpayers...
4. Don't call socialized fire departments when your house is on fire.
How about free markets and you buy fire protection from Well-point. Ohh pre existing fire condition... no coverage for you... Pay your fire bill...
There. You are free...To pay for all the services or:
To dig your own road, put out your own fire... if you have any time left, maybe you can form some market rules, make people obey and make a living...
Capitalism, communism, socialism, all the same, minor differences between them... Good, bad, all the same.
lol, brainwashing is an essential service,
let me know when they start teaching any kind of forbidden information.
http://www.rexresearch.com/invnindx.htm
here's a concept, how about actually taking control of your own health instead of getting ripped off? in the traditional chinese medicine system the doc gets paid to keep you healthy, disease = no $ and loss of reputation; and they use lots of traditional herbal remedies that big pharma can't patent. smell a rat yet?
http://www.amazon.com/Tao-Health-Sex-Longevity-Practical/dp/067164811X/r...
eating poisoned pseudofood creates disease?who'd a thunk it?
http://www.amazon.com/Eating-Well-Optimum-Health-Essential/dp/0060959584...
If you want to offer loans without interest then why don't you start a private charity that does this, instead of stealing everyone else's money to make education more expensive in the long run?
I've seen so many students abusing education. You really gotta watch them, boy! They're like crackheads.
They're like Wall Street traders at registration. Hell, they even take liberal arts classes. It's a scandal that, if it came out, would make Wall Street look penny ante [/sarcasm]
Why not just impose the financial component of shari'ah law and ban interest on student loans? That'll sure get Glenn Beck ranting!
actually, banning interest would solve a lot of problems.
...like GDP
In our view there is no stronger argument against permitting centralized control of industries, particularly finance, than the dynamic aptly demonstrated by the Bank of North Dakota gambit
Wow. I never knew the federal reserve played second fiddle to the Bank of North Dakota. Interesting that for some the biggest concern is not what the fed is doing, but that state governments are appreciating that they have the power to render the fed nearly moot with respect to many domestic banking operations since nearly all current funding schemes that involve the "public" sectors require interaction between the federal government and various levels of state & local government. Using the example of student loans imagine a world where all federally backed student loans that were to be used at a public university, or a private university that accepted or enjoyed the benefits derived from any source of public funding or support had to be routed through the particular state bank in question rather than through a member institution of the federal reserve? The coercive power of various aspects of state power meet. Regardless, it is good that you decided to rejoin the discussion regarding state power, money power and who controls or influences who. Btw, here is my hope that henceforth you find easier ways to enforce rest upon yourself. Peace
Whether this be good or bad really depends on who controls the government. In a democracy, it would be the people by way of vote, referendum, initiative. A state owned bank would be subject to and bound by constitutional guarantees.
This means as a citizen you have certain protections against such things as cronyism.
In a democracy, the people are the state and the government represent the people.
Unfortunately, if the government (and state) are controlled by banks and other corporations, the problems you mention become in fact real and dangerous. In fact, that is what we are witnessing today. The Health Care Bill is an example of that. Government mandated profits for private corporations, sucking the life out of peoples pockets.
Capitalism is incompatible with everything, including democracy and social justice and it will not rest until it has destroyed everything that doesn't work according to its rules.
Honest question: Are you for real?
Are you?
SPAM.......
Oh give us all a break already Alexandra, this isn't the beginner's corner.
if you're willing to read one of these with an open mind alexandra, you may find yourself reconsidering your statements:
http://www.kelsoinstitute.org/download.html
Good to see you back, Marla! The place has been going to the trolls without you . . .
1. It's getting worse, faster.
2. Medicaid is already bankrupting the states, if "reform" pushes more people into Medicaid, what happens then?
3. Medicare is already bankrupting the Treasury, if "reform" pushes more people into a Medicare-like governent plan, what happens then?
4. Many private practice docs don't take Medicaid (pays almost nothing) and limit Medicare patient numbers (pays minimal acceptable amount). If there are fewer patients with private insurance that reimbuses at a "high" rate, and more patients with insurance that reimburses at a "low" rate, doctors will attempt to cherry pick the patients with the better plans, and economically discriminate against the other insurances. This happens today. I suspect it will eventually become illegal.
5. When doctors are mandated to accept more low-reimbursement patients, they will either turn into high volume low quality factories, or, other than the idealistic subset of docs, many will stop practicing over time and transition into other fields.
6. Other health professionals with lessor training and perhaps talent will fill the void (NPs, PAs, etc), and more errors will occur, decreasing quality of care.
7. Or, perhaps something like a national health service will develop, where docs are paid on salary and don't have to worry about the reimbursement part. Many docs (like me) work this way already. I make a nice salary and benefits for a very reasonable lifestyle, and provide care to people with very little, if any, money. The biggest problem for the government is the high cost of medicines, and medical tests and procedures that I order to treat patients.
8. Defensive medicine clearly plays a role, so how can you let trial lawyers innundate the legal system with lawsuits scaring the crap out of doctors, and, ask doctors to provide cost effective, minimalist care? The second someone develops ovarian cancer, the doc is being deposed with the following question: "When Mrs. Smith complained of pain in her abdomen why didn't you order an MRI to rule out cancer?" Time to settle.
9. Me? I'm content for now in my government job. I could still make almost double in the private sector with double the stress.
10. I hope the kind of super high quality health care that is available for most people today is at least legal and hence available for some people tomorrow. I hope the government does't make it illegal to accept cash or good insurance and not accept government insurance. If that happens the system goes bad instantly.
11. I would bet some entrepenerial little country would set it up so US docs could practice fee for service medicine offshore. Health care havens.
#6 is so far off base I don't know where to start, so here goes: 'the doctor' is not the end all in health care, especially in a hospital setting.
NPs & PAs perform all the same services and procedures as doctors. Doctors decide course of treatment.
You may be confused & thinking of nurses or patient technicians (used to be orderlies) as less competent than doctors.
Every state should open a Bank of Whatever State.
Decrease the monopoly of the FED and Goldman and Rottenchilds.
It would bring competition. Monopolies hate that.
And why not a true Bank of the United States run similar to Bank of ND?
Like Franklin and Jackson wanted?
Put the FED out of business.
Reduce interest payments on the debt to near zero in the not too distant future.
Since the US spread freedom and democracy to Iraq and Afghan-i-nam and installed central banks...
Their are only 5 nations left in the world without a Rothschild controlled central bank:
Cuba, Iran, Libya, North Korea and Sudan.
Looks like an axis of evil...
So when Bush said Iraq, Iran and North Korea were an "axis of evil" back in 2002 (probably took weeks to train that chimp fuck to pronounce that line)...
Marla,
glad you are back.
print the money.
There is a growing movement towards State Banks and I can't say I'm opposed to it given the alternative we've been living with.
Ellen Brown has been writing about this issue for some time now on her website: http://www.webofdebt.com/
Here is one of the more recent write ups she's done on the issue...and there's plenty more available at the site:
THE GROWING MOVEMENT FOR PUBLICLY-OWNED BANKS
Ellen Brown, March 18th, 2010
http://www.webofdebt.com/articles/growing_movement.php
As the states’ credit crisis deepens, four states have initiated bills for state-owned banks, and candidates in seven states have now included that solution in their platforms.
“Hundreds of job-creating projects are still on hold because Michigan businesses and entrepreneurs cannot get bank financing. We can break the credit crunch and beat Wall Street at their own game by keeping our money right here in Michigan and investing it to retool our economy and create jobs.”
--Lansing Mayor Virg Bernero in the Detroit News, March 9, 2010
Struggling with 14% unemployment, Michigan has been particularly hard hit by the nation’s economic downturn. Virg Bernero, mayor of the state’s capitol and a leading Democratic candidate for governor, proposes that the state relieve its economic ills by opening a state-owned bank. He says the bank could protect consumers by making low-interest loans to those most in need, including students and small businesses; and could help community banks by buying mortgages off their books and working with them to fund development projects.
Bernero joins a growing list of candidates proposing this sensible solution to their states’ fiscal ills. Local economies have collapsed because of the Wall Street credit freeze. To reinvigorate local business, Main Street needs a heavy infusion of credit; and publicly-owned banks could fill that need.
A February posting tracked candidates in five states running on a state-bank platform and one state with a bill pending (Massachusetts). There are now three more bills on the rolls – in Washington State, Illinois and Michigan – and two more candidates on the list of proponents (joining Bernero is Gaelan Brown of Vermont). That brings the total to seven candidates in as many states (Florida, Oregon, Illinois, California, Washington State, Vermont, and Idaho), including three Democrats, two Greens, one Republican and one Independent.
The Independent, Vermont’s Gaelan Brown, says on his website, “Washington DC has lost all moral authority over Vermont.” He maintains that:
“Vermont should explore creating a State-owned bank that would work with private VT-based banks, to insulate VT from Wall Street corruption, and to increase investment capital for VT businesses, modeled after the very successful State-owned Bank of North Dakota.”
The Bank of North Dakota, currently the nation’s only state-owned bank, is the model (with variations) for all the other proposals on the table. The Bank of North Dakota acts as a “bankers’ bank,” including doing “participation loans” with other banks, allowing them to compete with larger banks. In a participation loan, the community bank originates the loan and takes responsibility for it, while the participating bank contributes funds and shares in the risk and profits. The Bank of North Dakota also makes low-interest loans to students, farmers and businesses; underwrites municipal bonds; and serves as the state’s “Mini Fed,” providing liquidity and clearing checks for more than 100 banks around the state.
Three New Bills Pending for Publicly-owned Banks
Proposals for publicly-owned banks in other states have now gone beyond the campaign talk of political hopefuls to be drafted into several bills.
The Michigan Development Bank
The Michigan bill has gotten the most press. Introduced into the legislature earlier this month, it mirrors Bernero’s state bank idea. According to a press release issued by Senate Democrats on March 9, the bill’s aim is to “keep Michigan’s money in Michigan” by putting tax dollars into a proposed “Michigan Development Bank”. The Bank would function like a traditional bank but would focus on economic development rather than profit. The press release quoted Senator Gretchen Whitmer (D-East Lansing):
“Investing in the state’s economy is the greatest way to create jobs, and this proposal will provide small businesses and entrepreneurs the funding they need to invest and grow. Our economy has stagnated due in part to stale thinking in Lansing, and this is just the type of innovative idea we need to create real economic change, using our own money to rebuild the state.”
Senate Democratic Leader Mike Prusi (D-Ishpeming) stated:
“Michigan’s economy has been suffering, and working families in the state have had difficulty keeping up with credit card bills, college tuition prices and mortgage payments. Establishing the Michigan Development Bank will keep our hard-earned dollars right here in the state to invest in small business, create good-paying jobs to get people back to work, and help protect the middle class.”
Also quoted was Senator Hansen Clarke (D-Detroit):
“With the current state of our economy, every dollar counts, yet we’re depositing our money in other people’s pockets by investing in big corporate banks without seeing much lending in return. It’s time for the Mitten State to lend itself a helping hand and establish a bank that is willing to invest in our small businesses and offer the financial support necessary to see job growth.”
For startup capital, Senate Democrats suggested that Michigan could sell voter-approved bonds. With an initial capitalization of $150 million, they estimated the bank could lend up to $1 billion to small businesses, students and farmers, and offer low-interest credit cards to consumers. For deposits, the bank could follow the model of the Bank of North Dakota and use state revenues. So says Gene Taliercio, a Republican candidate for the state Senate, who has also put his weight behind the Michigan Development Bank. In a video clip on the website of the local Oakland Press, he says:
“We’re talking about restructuring the whole tax system, in the sense that the way its set up is that all taxes are going to go into this central bank. . . . Every dollar that the state of Michigan makes goes into this bank.”
The State Bank of Washington
A similar bill, HB 3162, was introduced to the Washington State Legislature on February 1. The bill has generated so much interest that Steve Kirby, chair of the Financial Institutions and Insurance Committee, has scheduled a special work session on it. According to John Nichols in The Nation, the State Bank of Washington was formally proposed by House finance committee vice chair Bob Hasegawa, a Seattle Democrat. Nichols quotes Hasegawa:
“Imagine financing student aid, infrastructure, industry and community development. Imagine providing access to capital for small businesses, or otherwise leveraging our resources instead of having to do it with tax incentives. Imagine keeping our resources local instead of exporting them as profits, never to be seen again—that’s what this bank could do.”
Leveraging rather than taxing is how private banks have been creating “credit” for centuries. States could do the same thing, cutting the middlemen out of the equation, saving significant sums in interest and fees and generating revenue for the state.
A nonpartisan analysis of the Washington bill prepared for the state legislature noted that the bank would be the depository for all state funds and the funds of state institutions, and that these deposits would be guaranteed by the state. The bank would be run by a board of 11 members and would be chaired by the State Treasurer. It would have the same rules and privileges as a private bank chartered in the state. To get the bank off the ground, voters would have to approve amendments to the state Constitution, since current law prohibits the state from lending credit and investing in private firms.
The Community Bank of Illinois
A third bill, introduced by Illinois Representative Mary Flowers, is on its way through the legislative process in Illinois. According to the Illinois General Assembly website, the Community Bank of Illinois Act would establish a state bank with the express purpose of boosting agriculture, commerce and industry. State funds and money held by penal, educational, and industrial institutions owned by the state would be deposited in the bank and would serve as reserves for loans. The bank could also serve as a clearinghouse for other banks, including handling domestic and foreign exchange; and it could buy property under Eminent Domain. All deposits would be guaranteed with the assets of the state. The Bank would be managed and controlled by the Department of Financial and Professional Regulation, with input from an advisory board representing private banking and public interests.
An amendment to the initial bill would enable the Community Bank of Illinois to make loans directly to the state’s General Revenue Fund, helping the state cope with its current budget challenges.
A Massachusetts-owned Bank
On March 12, the Associated Press reported that a jobs bill sponsored by Massachusetts Senate President Therese Murray also includes a call to study a Massachusetts-owned bank. She told a business group that a state-owned bank has worked in North Dakota, helping to insulate that state from the worst of the recession while also keeping its foreclosure rate down. A state-owned bank could spur job creation and free up lending to Massachusetts businesses.
Grandfather of the Concept: The Bank of North Dakota
All of these proposals take their inspiration from the Bank of North Dakota, which was founded in 1919 to resolve a credit crisis like that facing other states today. Last year, North Dakota had the largest budget surplus it had ever had; and it was the only state that was actually adding jobs when others were losing them. In March 2009, when 46 of 50 states were in fiscal crisis, North Dakota was in the enviable position of discussing tax cuts and looking for ways to spend its surplus.
By January 2010, according to a National Public Radio news clip, only two states could still meet their budgets – North Dakota and Montana. On February 8, however, the Montana paper the Missoulian reported that the Montana State Legislature’s chief revenue forecaster foresees a budget deficit by mid-2011, leaving North Dakota the only state still boasting a surplus.
North Dakota’s riches have been attributed to oil, but many states with oil are floundering. The sole truly distinguishing feature of North Dakota seems to be that it has managed to avoid the Wall Street credit freeze by owning and operating its own bank. According to the North Dakota Department of Commerce, the BND turned a profit in 2009 of $58.1 million; and this money goes into the state’s General Fund. North Dakota’s economy is ten times smaller than Michigan’s, suggesting that Michigan could generate $500 million per year in this way; and Washington State and Illinois present similarly inviting possibilities.
That defuses the objection raised in a March 15 editorial in The Detroit News, arguing that Michigan can ill afford the $150 million capital investment to start a bank. If operated like the BND, the Michigan Development Bank would soon be a net generator of state revenues. There are other possibilities besides a bond issue for providing the capital to start a bank, but that subject will be reserved for another article.
The BND’s 90-year track record of prudent and profitable lending defuses another objection to state-owned banks: that a public agency cannot be trusted to act responsibly in managing public funds. The Detroit News editorial concluded that Michigan should “leave banking to the bankers,” but it is precisely because the bankers have destroyed the economy with their reckless lending practices that the public needs to step in. We need a “public option” in banking to set standards and keep private banks honest.
The True Potential of Publicly-owned Banks
North Dakota broke new ground nearly a century ago, but the true potential of publicly-owned banks remains to be explored. Nearly all of our money today is created by banks when they extend loans. (See the Chicago Federal Reserve’s “Modern Money Mechanics”, which begins, “The actual process of money creation takes place primarily in banks.”) We the people have given away our sovereign money-creating power to private, for-profit lending institutions, which have used it to siphon wealth from the productive economy. If we were to take that power back, we could generate the credit we need to underwrite a whole cornucopia of projects that we don’t even consider because we think we lack the “money.” We have the labor and we have the materials; we just lack the “liquidity” necessary to put them together to create products and services.
Money today is just a ticket, a receipt for work performed and goods delivered. We can fund the work we need done by creating our own credit. The real promise of publicly-owned banks is not that they can bail out subprime borrowers but that they can jumpstart the economy by creating real wealth. They can provide the liquidity to put labor and materials together, allowing the economy to build and grow. Our private, profit-driven banking sector has been bleeding wealth from the rest of the economy. Public-interest banks can transfuse the economy with the credit it needs to flourish and be productive once again.
For more updates on the movement for publicly-owned banks, see http://www.public-banking.com.
To sign a petition for a citizen-owned bank in California, go to http://www.change.org/actions/view/help_the_terminator_save_california.
First posted on Yes! Magazine, March 17, 2010.
I hadn't realized that state banks threaten to develop into a "movement." Perhaps that explains Marla's article . . . though its perspective remains inexplicable to me.
I've been curious about the possibilities of a State Bank for some time, dating back to when I first stumbled on to one of Ellen Browns articles on the issue. Quite frankly, the more I've looked at it the more I'm in favor of it. The benefits far outweigh the detriments in my opinion. I'm not going to try to go into too much detail about it since I'm really more of a student of the issue than a professor. However, there is plenty of information available at webofdebt.com about this. Read up on it for yourself and arrive at your own conclusions. If nothing else, it's an interesting subject and one of the only viable suggestions I've found on how to escape the stranglehold the major banks seem to have on our economy at every single level.
Very interesting -- thank you for the posting.
Let's look at a parallel situation: isolationism.
The U. S. tends toward isolationism when it perceives injustice in the "free trade" paradigm. On the other hand, the States see a similar financial isolationism in creating their own State Banks to counter the TBTF banking debacle. It's just a natural inclination, good or bad depending upon the execution of the mechanics of establishing the Banks. Repeating the procedures and mind-set of the TBTF financial institutions won't solve the problem. Perhaps ND has it right since it does have a track record.
Just a thought...
Bank managements under the control of a state government are answerable to it's citizens and can be thrown out at least once every few years. This seems to me more acceptable than banks being controlled by the swindlers of the Fed(controlled by private financiers/bankers), FRBNY or Wall Street. Capitalism is an economic system that works only under the rule of and by law which has clearly been absent in the last few decades which has seen a rule by bankers rather than a rule by law. A bank management and a banking system is answerable to the people it is supposed to serve. This is indeed a novelty in the world we live in. In case anyone misunderstands me let me make it clear that I am not talking about the state. I am talking about the depositors who show their trust in the banks by keeping their hard earned money with them and the borrowers(loan customers) whose businesses need loans for expanding their viable businesses and who pay the market rates of interest for this privilege. After all as shown in ZH, banks create money with a ledger entry/a click of the mouse and aren't exactly operating with the citizens' permission to create this money as required by the constitution. The shareholders of banks, namely the people putting their money into the pension funds and other institutions who hold the shares in these banks have no power whatsoever. The pension fund managers and the managers of the concerned institutions ride roughshod over their supposed bosses, the people who provide them with these funds.
sorry, problems with my wireless internet meant it didn't post the first time i clicked save comment
sorry, 2nd time!
Obligatory: MARLA! :)
Shit, now I have to figure out the captcha. This could take me a while...
Marla - welcome back !! Good to hear your thought again
I live in North Dakota, Grand Forks, to be precise. The Republicans in ND have railed against the B of ND for the last 90 years. Their reasoning: the Banksters should be the ones controlling the movement of money in our state. Well, we can see how the Banksters have controlled the flow of money, nationally. Not too well, except that their profits are privatized, and their losses are socialized. Our State Bank is Socialism at its finest. Not all Socialism is bad. Our Bank recycles money throughout the State of North Dakota. My daughter's student loan is through our Bank. It prides me that my money flows back into the state, rather than moving off to Minneapolis, or JP Morgan. If more states had State Banks, maybe the crisis would not have been so bad, as there would have actually been some "Real" competition among the "money lenders" (aka Banksters).
Marla: after reading, and re-reading your missive, I have realized that you have absolutely no clue of how the Bank of North Dakota was formed, why it was formed, nor the true role of the Bank of North Dakota in the economy of our state. I am guessing that you have never been to North Dakota, and have been briefed on the Bank's role by North Dakota Republicans. The Bank plays a critical role in developing industry in our state. Industry that is owned by entrepreneurs within our state, whose's profits are used to promote business within our state. These profits help expand and grow local businesses, and hire local residents, thus fueling growth within our state. How's your state doing? Probably not very well, as almost every state in the Union is in dire straits. Yes, it's a small slice of Socialism, and we also have a State-operated Insurance entity, as well as a State Mill and Elevator operation. These, again, recycle growth within the State of North Dakota, and, again, the Republicans in our state HATE all three entities. Again, I ask, how's your state doing, my state is doing quite well thank you.
Good post Jim.
Not all industries should be about profit...after all...who the hell wants a for profit fire department in their neighborhood?
Sometimes the public good must come before the private gain. And if that's Socialism...then sign me up.
Summing up our private central bank and the banksters:
"It doesn’t have to be like that, in fact it’s a ridiculous notion that the people of the United States, or any country, should pay private individuals for the use of their (private) money system. Ridiculous!"
http://economicedge.blogspot.com/
Marla! You sure can start a fire lady. Nice to see you back...it's been too long.
For me the Bank of North Dakota is a jewel. It is run in a fully transparent fashion that prevents political perversion and fraud. It acts as a "mini-Fed" to local banks who do not belong to Federal Reserve System or the FDIC. It uses the State's assets to create a vast pool of money, which in turn supports the public good including student loans. It supports business by purchasing loans from local banks giving them the reserves to lend more.
As for the new Health Care Act, the federal government can used the Bank of North Dakota to expand a direct lending program and Pell Grants for college students. The bill sets automatic annual increases in the maximum Pell grant, scheduled to rise to $5,975 by 2017 from $5,350 this year. The new Pell initiative also includes $13.5 billion to cover a shortfall caused by a steep rise in the number of Americans enrolling in college and seeking financial aid during the recession. It's estimated that by using the State Bank of North Dakota, the Federal Government will save $61 billion in interest payments to private banks over the next 10 years.
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