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Banking for California's Future
Intro by Ilene
California's legislature passed a bill to study the feasibility of forming a state-owned bank. It just needs Jerry Brown's signature. According to the Public Banking Institute, "14 states have decided enough is enough; they have introduced legislation for publicly owned banks or derivations, or for studies or task forces to determine how a publicly owned bank would operate in their jurisdiction. Eight of these states have bills that were only recently submitted, in 2011." Arizona, Montana and Maine have introduced legislation to form state banks. In Massachusetts, the commission to study feasibility was in full force, but the Mass. study commission decided against it, after the Boston Fed came out with a statement saying it wasn't necessary--that the private banks had the state's banking needs covered. Visit Public Banking Institute for more information. Ellen Brown is president of the Public Banking Institute.
Banking for California's Future
Courtesy of Ellen Brown of Web of Debt
Wall Street's not cutting it: California's legislature voted to do a feasibility study on establishing a state-owned bank.
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Photo by Steve Rhodes
AB 750, California’s bill to study the feasibility of establishing a state-owned bank that would receive deposits of state funds, has passed both houses of the legislature and is now on the desk of Governor Jerry Brown awaiting his signature.
It could be the governor’s chance to restore the state to its former glory. As noted in TIME Magazine:
[I]n the 1950s and ‘60s, California was a liberal showcase. Governors Earl Warren and Pat Brown responded to the population growth of the postwar boom with a massive program of public infrastructure—the nation’s finest public college system, the freeway system and the state aqueduct that carries water from the well-watered north to the parched south.
But that was before Proposition 13, a California constitutional amendment enacted by voter initiative in 1978. Prop 13 limited real property taxes to one percent of the full cash value of the property and required a two-thirds majority in both legislative houses for future increases of any state tax rates.
Prop 13 radically reduced the tax base, and as economist Michael Hudson observes, it is too late to raise property taxes now. The tax savings simply drove property prices up, getting capitalized into additional debt service to the banks. Today, he says, “so much urban property is sinking into negative equity territory that a rise in property taxes will lead to even more foreclosures and abandonments, and hence even lower fiscal returns.”
Meanwhile, the state is struggling to meet its budget with a vastly shrunken tax base. What it needs is a new source of revenue, something that won’t squeeze consumers, homeowners, or local business.
A state-owned bank can provide that opportunity. North Dakota, the one state that currently has its own bank, is the only state to be in continuous budget surplus since the banking crisis began. North Dakota’s balance sheet is so strong that it recently reduced individual income taxes and property taxes by a combined $400 million and is debating further cuts. It also has the lowest unemployment rate, lowest foreclosure rate and lowest credit card default rate in the country, and it hasn’t had a bank failure in at least the last decade.
Revenues from the Bank of North Dakota (BND) have been a major boost to the state budget. The bank has contributed over $300 million in revenues over the last decade to state coffers, a substantial sum for a state with a population less than one-tenth the size of Los Angeles County. North Dakota is an oil state, but according to a study by the Center for State Innovation, from 2007 to 2009 the BND added nearly as much money to the state’s general fund as oil and gas tax revenues did. Over a 15-year period, according to other data, the BND has contributed more to the state budget than oil taxes have.
North Dakota is a conservative red state, not the sort you would expect to be engaging in government enterprise. But the conservative justification for a state-owned bank is that it preserves state sovereignty, allowing the state to be independent of Wall Street and the Feds. The BND is not a business competitor of the local banks but partners with them, helping with capital and liquidity requirements. It participates in loans, provides guarantees, and acts as a sort of mini-Fed for the state.
According to the annual BND report for 2010:
Financially, 2010 was our strongest year ever. Profits increased by nearly $4 million to $61.9 million during our seventh consecutive year of record profits. . . . We ended the year with the highest capital level in our history at just over $325 million. The Bank returned a healthy 19 percent ROE, which represents the state’s return on its investment.
A 19 percent return on equity beats the 170 billion dollars LOST by CalPERS and CalSTRS, California’s two public pension funds, by the time the stock market hit bottom in March 2009. The BND was making record profits all through that period.
The BND augments state revenues in other ways besides just returning its profits to the general fund. It helps build the tax base by providing the funding needed by local businesses, and by financing the infrastructure that attracts them. Among other resources, it has a loan program called Flex PACE that allows a local community to provide assistance to borrowers in areas of jobs retention, technology creation, retail, small business, and essential community services.
North Dakota: Banking on the Locals
The BND also furnishes a credit line to the state itself, one that is effectively interest-free, since the state owns the bank. Credit lines are extended in times of emergency or whenever state departments or municipalities face unforeseen circumstances, such as the recent flooding in the state. Having a credit line to the state’s own bank allows state and local governments to avoid extortionate interest rates from Wall Street and pressure to privatize and reduce services in order to avoid downgrades from rating agencies.
Timothy Canova is Professor of International Economic Law at Chapman University School of Law in Orange, California. In a June 2011 paper called “The Public Option: The Case for Parallel Public Banking Institutions,” he compared North Dakota’s comfortable financial situation to California’s:
. . . California is the largest state economy in the nation, yet without a state-owned bank, is unable to steer hundreds of billions of dollars in state revenues into productive investment within the state. Instead, California deposits its many billions in tax revenues in large private banks which often lend the funds out-of-state, invest them in speculative trading strategies (including derivative bets against the state’s own bonds), and do not remit any of their earnings back to the state treasury. Meanwhile, California suffers from constrained private credit conditions, high unemployment levels well above the national average, and the stagnation of state and local tax receipts.
California was once the nation’s leader in technology, industry, entertainment and public education. Under Governor Pat Brown, tuition at UC campuses was free, making higher education available to all. Today tuition is about $13,000 a year, and the state has an unemployment rate hovering at 12%.
California, like North Dakota, is resource-rich. A state-owned bank will allow it to capitalize on its resources to full advantage by providing the credit needed to realize its potential. As the bank was described by Assembly Member Ben Hueso of San Diego, who authored AB 750, "It's not the fad of the moment, a pair of tight fitting jeans; it's a pair of construction boots."
Ellen Brown wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas with practical actions. Ellen is an attorney, president of the Public Banking Institute, and the author of eleven books, including Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free. Her websites are WebofDebt.com and PublicBankingInstitute.org.
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Get ready to click the red triangle all you worshippers of the god of money:
There Earth cannot provide enough "resources" to back up the amount of capital required to plug the black hole of debt that has been created over the past few centuries.
Notice how civilizations had to keep moving and expanding across the globe, conquering (or liberating, depending on your propaganda level) new lands? Well there are no new lands left. Half of the petroleum the planet had to give has been burned, most of the old growth forests are gone, the oceans are turning acid, the topsoil is depleted, the aquifers are going dry, over one hundred species are pushed into extinction daily, 90% of the large fish are gone from the seas, etc, ad absurdum.
The god of money has you slashing and burning that which provides you life. Is it worth felling the last remaining redwoods to keep what we temporarily refer to as "the State of California" running? Know this: This system will fall. If it is not stopped by our conscious decision to alter course, then the bulldozer of industrial capitalism will decimate our life support systems.
Flame me to your hearts content. Just remember as you do it, that you are alive because air, water, soil, and the complex interplay of rich ecosystems have made it possible.
from this day forth, you have janus shoulder-to-shoulder.
strenght to strength!
amen,
janus
Ellen Brown? Seriously ????
Fed not moving fast enough for you on causing a hyperinflationary collapse?
Durden, why is this socialist drivel on here?
Because this forum provides for an interplay of ideas, from which you may draw your own conclusions.
If I had a choice between dealing with the current Bankster Occupation Government (BOG) at the Federal level and public state banks, I'd take the latter. Smaller is better, public or private at this point.
well, i think the vast majority of people here are of the anarchist/voluntaryist or minarchist flavor
i'm in the former and i believe that most of us have the same end result in mind
the problem that i see (historically) is that transition from here to there
in the general population, very few people understand banking
i speak to a lot of folks and unfortunately the masses are cluless (or have been conditioned through govt school and/or state sponsored media)
the level of resisitance overall is strong and you'll be misunderstood by most
it took several steps to here and it will probably take several steps to get back (or where we'd like to be)
regards
It has always amazed and amused me how state-worshiping collectivists always scream about concentrated economic power and monopoly when that power is in private hands. They see nothing inconsistent however in concentrating that same power in political hands. I guess they assume they'll be the whip-wielding hand.
Im not saying the current arrangement is good. It's not. As others have correctly pointed out, what we have today is a modified form of fascism (one that has been decades in the making). However, increasing the degree of state control, especially in money and banking will only serve to multiply the problems we already have.
What a friggin train wreck
Well said
Couldn't agree more. A CA central bank would be the most corrupt, wasteful thing I could imagine. Leftist politicians picking winners and loser, funneling (presumably) taxpayer-backed money to their favorite causes. CA is in a depression (just got back from San Diego for first-hand observations) largely because of an over-arching nanny-state government. The CA central bank would just be another nail in its coffin.
philosophically the (central) banks are evil and must go, sound money is the answer
how in th hell do we make that happen? these parasites aren't just going to roll over and give it up
consequentially (done properly) taking back any power to a state or local level could been seen as a step in the right direction
my hope would be to eventually make the case at the state or local level for partial or complete backing of a currency (i know, putting the shit back into the horse would be difficult but a man can dream can't he?)
for me, getting rid of the fed is priority number one
regards
Sorry to upset the status quo, but here is a news flash:
We Don't Need Banks
AT ALL.
It's not where wealth comes from. It's not where capital comes from. Capital comes from your friends, neighbors, relatives or the guy on the corner, who saved their dough and want to invest in your project. Capital comes from savings. Savings is the underutilization of other capital.
We don't need fake fiat credit, it doesn't anything other than distort how real capital gets invested. Does Solyndra really surprise you? When money itself is a fake, made up resource, it re-directs real investing. So we wind up with projects that are unsustainable. If solar tech was worth doing, you would know because it would be profitable IN THE FIRST PLACE. Then, you would ask your friends to invest their savings and expand your business.
WE
DONT
NEED
BANKS
You must have an awfully large number of friends.
Do you think cars started out cheaper than horses?
I think that cars started out better than horses, and got even better from there.That's why people invested their own private capital in their manufacture. It worked.
As for "awfully large number of friends," what does that mean? You mean capital comes from Big Brother? Where does it come from? It comes from saving.
That is a very good point, and you could carry the same argument forward and state that is the same reason we do not need central planning.
Ilene's posts are completely rediculus. Tyler if you have the need to present both sides of current issues how about at least having writers than can provide logical arguments for their point of view. I know it is hard to find them because many of the opposing points of view can not be logically argued. Ilene's posts are simply atrocious.
Add to that we don't need a trucking system either. What a silly idea - the thought that we need a mechanism to get stuff from the folks who have it to the folks who need it.
Think through a bit more carefully the idea presented above that you can build cars by getting the capital you need from friends and business associates. That system needs someone to carefully record who invested how much, when, at what interest rate; when, where, and how much interest has been returned to each investor; and where will the funds come from for the one(s) who suddenly need their funds returned; and where will the funds come from when the car manufacturer runs out of funds from friends and business associates and still needs more funds. When you get all of these issues properly addressed, you will have created a bank. Or don't you know what banks actually do??
Yeah. We don't need no stinkin banks. Or trucking systems. Or water delivery systems. Or gas delivery systems. Or roads. Or central planning so that the target system stays coherent. It would be far better to just let those who need it go get it from those who have it. Not!!
Sorry that it happens to be some guy on the internet (me) to point out to you that your worldview is incorrect. A trucking system is comprised of real capital. A "bank" is a license to issue coupons that look like money (Federal Reserve Notes). They aren't money. Money is a storehouse of real capital, and holds its value through time. Federal Reserve Notes leak! After a while they are valueless. Consider the buying power of a FRN from 1913 versus now. Almost empty! We don't need that.
hey, cutie-pie, i've got a lil something special for ya.
no, i won't do it everytime -- but, darlin, when inspiration strikes, you best get out its way!
sweet dreams,
janus
http://www.youtube.com/watch?v=E1vsC8_zb1Q&feature=fvsr
(phil, janus apologizes -- you are a gentleman; but ilene belongs to janus)
So they let the employees of oil companies hold the oil money briefly before handing it over as interest to the BND.
How is "having a credit line to the state" different than monetization of treasuries?
More big government progressive centrally planned nonsense from Ilene. The government can not even enforce regulations effectively because of corruption and a state owned bank is being proposed. What is next, monetization of state bonds by this bank. Rediculous. In California unions and government parasites will infect and ruin the bank, just to be porpped up by the tax payer once again, except that the time taken to backstop the bank will take less time than the private sector. Of course legitimate and profitable region banks will not be able to compete with a state run entity and will go bankrupt. Interesting times, stupid solutions, from people who have no idea what they are talking about and have not learned from recent history. Why do you think that in large part banks have ruined the economy? Not because they are banks, but because the regulators lie in the same bed as the bankers, there is no difference. No amount of regulations, no number of state run banks will fix any problems when the governance system is rotten at the core. Good grief. We need to reinstate capitalism and root out coporatism. Separate business and government, seems to me that it is not that different than enforcing the separation of church and state.
It is well known, there are plenty of historic models (failed ones), that provided examples that communism/socialism/central planning are epic fails, why even go there. Fools opt for the communist tyrant instead of the fascist tyrant when times turn bad not realizing the end result is always the same. Start by demanding and holding onto your freedom, and then taking measured steps to create real change. Bouncing to the other extreme is not change, it is just changing the name of what the current flavor of oppression is known as. We need government, of that there is no doubt, but we need small, freedom protecting, corruption free government.
California is not a model state by any means. It is one of the most bankrupt and corrupt states in our union. The most rotten states, the most bankrupt states are ironically enough the most progressive states in the country.
So on and so forth....
There is not even enough state revenues to pay pensions and all of the other state expense. California issues IOU's because it does not generate enough revenues to cover its expenses. California municipalities have and are considering bankruptcy. How can anyone even state what is in the quote above as fact? This is laughable to say the least, it is also a blatant propganda lie. Herein lies one of the big issues with the current system, no one, not even the public, wants to recognize the truth. The system is so rotten to the core that the system can not be the solution.
So proposing that an insolvent entity acquires even more control over a predicament they helped to create is the solution is the penultimate in illogical thinking.
TENTH AMENDMENT: The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved TO THE STATES respectively, or to the people.
That sounds familiar, oh yeah, that's from... what did Bush call it? Just a goddamned piece of paper.
ilene: yeah, because the fascist model of private ownership under public control has proven to be so transparent, efficient, honest, and has had such a great outcome ... it's time to upgrade to the communism model of public ownership and public control!
Not.
So are you saying that North Dakota's Bank doesn't make profits? Or that North Dakota is communist?
SO many can't even stand the thought of a Bank of California.....Big fans of Bank of America I guess.....
That'll be great for Calif. The bank will be completely immune to political pressure. There is no possibility it will be pressured into lending money to state and local governments or to private borrowers who: (1) Have contributed money to the current rulers of the state or (2) Satisfy ACORN's criteria for high-risk mortgages.
ilene - do you like living with your head up your arse? No, so where'd you get this shit from then?
California... is resource-rich. A state-owned bank will allow it to capitalize on its resources... providing the credit needed to realize its potential. As the bank was described by Assembly Member Ben Hueso of San Diego.. "It's not the fad of the moment.. it's a pair of construction boots."
Run me through the success rate of all State run banks would ya?
Next run me through the success of State run anything??
Finally run through the successes of State backing any project, especially the clowns of the State successfully exploiting resources or in fact doing anything remotely professionally (profitably) ???
When will average everyday morons like you wake up and smell reality or even take a salutory look at history to learn some simple fuking lessons? The State is not the answer to anything, it is the whole fuking problem to everything, so stick your Statist ideas in the same place your heads at right now
...the Free Market is the only winning formula in history, all else is total bunkum, have you got it love?
Not that I know or care enough about the matter at hand to really get too involved, but is it your intention to denigrate state run entities to Wall Street run entities? Because I am thinking even if state banks are badly run they have to be better than the outright theft perpetrated by the likes of BAC and Citi, GS, ML, or even the long list of zombie regional banks. One of the advantages of a state bank is that any and all banks have to meet federal banking standards but states can impose higher standards for banking practices and they can audit and enforce those to a higher standard than the federal government examiners are currently doing as well. Capitalism is starting to get a track record that looks dodgy next to government these days, after all the commercial banks only exist now by feeding at the taxpayer trough.
BoiltheRich - i'm going to ask you to hold 3 images in your head at once ok. This will stretch your mind (maybe to greaking point!) so that you can understand the 1 dimensional piece of crap you (and ilene here) share in your heads about how the world works is washed away. Here goes..
Image 1. The Govt (a monopoly institution)
Image 2. Wall Street (bankrupt in 2008, still bankrupt except for auditors cooking their books)
Image 3. a host of 20 competing privately owned banks
Note as we start this lesson in economics Image 3 are 20 competing banks for your business. In a free market they are allowed to go bankrupt.
In Images 1 and 2 however we have the State thieiving money off the public (it's called tax) and pouring them into bankrupt in 2008 Image 2 (it's called bailouts).
Presumably you've alrady noticed something. Yep competing businesses stand on their own 2 feet. When 2 of the 20 go bankrupt they only harm the few depositors that are with them. 18 out of 20 are ok
Now notice what happened in 2008. Image 1 bailed out Image 2 costing the whole (100%) of society a pretty penny. And what happened post 2008? The Big Bad Banks went from 50% of the banking sector to 70%. The shit got bigger. Not only is the shit even larger today as a result of Image 1 and 2 being in bed together but the shit is going to hit the fan even harder next time
So when you say " Capitalism is starting to get a track record that looks dodgy next to government" you could not be further from the truth mate. In fact Govt has never looked so rotten, bankrupt and a more total failure mechanism than ever before.
It is the private sector that is propping your shit (Image 1 and 2) up. Because only the provate sector creates real wealth in society and for society. Images 1 and 2 rob society, piss it away and squander it on making even bigger messes and piles of crap to clean up
...as you're about to find out shortly in Credit Crunch II (remember that was Credit Crunch I that Govt 'solved')
Capitalism has pushed government into business just as sure as government has interfered with capitalism, and as to 18 of 20 being OK you will get a lot of hoots about that from readers here.
As to government being a 100% monopoly, last time I checked there were 169 federal governments in the world to pick from.
As to your simplistic logic which is so certain of it's validity even as your potty mouth and personal attacks run away with any credibility to your reasoning all I can do is reply in kind, neener neener neener shit for brains. You just keep licking the fascist boots of your commercial overlords and see what they will pay you once your ilk demand they be freed from the shackles of labor law and legal liability, but be ready because in your little world you will be eating shit with the chickens.
BTR,
you made bitch-meat outta that one!
bravo.
wish i could green arrow you; but janus don't vote.
voting is for losers (truer words have never been spoken; and the world's western nations have since WWII PROVEN the evils of 'democracy' in vivid and gory detail -- splattered across the pages of 'fringe' media...all the while the borguise sit in their leather lazy boys and curse gay marriage or abortion or the like -- little do they realize that they are voting for their own and their children's destitution)
"...the Free Market is the only winning formula in history, all else is total bunkum, have you got it love?"
Yeah, the American people are really winning with this 'winning formula'.
What parallel universe do you live in? There have not been free markets for years, and the only people winning are the ones who have rigged the system for themselves.
Time for the people to rig the system for their own benefit.
PayDay - the American people are being systematically robbed/raped by the biggest criminal organisation in every country: democratic Government.
The reason you don't know that is a direct result of State education which has taught you precisely zero about how the world works and like everything else Govt does is way too expensive, a waste of everybodies time and a piece of steaming crap.
Competition is the fastest and best method for society to get what it wants. All monopoies, both public (the State) and private (Microsoft etc) produce garbage.
Only competiton in business, such as in airlines, cars, clothes, food etc produce lowest price, highest quality, choice, modernisation etc produce fabulous results
You might like to compare the Trabbant (a State produced car) or monopolist Microsoft software against the free market (VW, Audi, BMW etc etc) and Apple of Linux. It's the difference between quality and 'Wow' you enjoy and a piece of crap you suffer
Regards "rigging the system" who do you think rigs free markets?
Who places all the burdens on businesses, particuarly small ones, so they can't operate, their costs rise, their business is strangled and they cannot compete against Big Giants (see Big Oil, Big Pharma, Big Healthcare, Big Education, Big Banking)?
That'll be the biggest monopoly institution in society, Govt, working on behalf of the biggest monopolist ebnterprises in society (see pervious list of 'Bigs').
The free market is 'free'. Yes no rules or restrictions. Competition is a constant in a FREE market. It is only Govt regulated markets where competition is strangled and killed for the benefit of big monopolist banks, Car Co's, Pharma Co's etc etc
That'll be because Govt is a monopoly (of power) in society. Govt is the very enemy of freedom, one wants authority, the other seeks only the freedom of eachof us to make our own choices through life. Freedom only exists on a personal, individual level. It cannot exist when tits behind Govt desks decide for us
Both America and Europe is having its freedom and free markets trampled and strangled to death. That is exactly why we're in so much trouble. That is why the unemployment cues are so fuking long. Because Govt destroys the wealth created in the free market private sector. Govt robs society of its wealth then pisses it away on monopolists and other parasites in society (welfare etc)
The free (competitive) market is the ONLY mechanism that works for society. All Govt (monopolist) intervention has been an unmitigated failure ...as Obumma proves once again
So we are just going to ignore the record of the only real-world example we have?
There may be good reasons for a state to have a state bank but expecting it to be a profit center is not one of them. As for the Boston Fed's view that Wall Street is adequately serving the public's needs - Wall Street abandoned the last vestiges of that pretense under Clinton.
The problem is Calif is run by union scum and illegals. Any god idea will be looted and destroyed like they looted taxpayers and looted CALPERS.
The people of ND are not criminal scum like MexiFornia.
When it doubt, fall back on racism and unsupported slander
Actually, you could have simply said, as I was going to say, ND is agricultural, rural, and wealth producing where as C has a very different predicament. Sure, Cali has agri, but it also has huge populations in urban centers and a lot of structural problems that ND doesn't.
Small towns are funny in a number of ways, but one of the biggest is you can fuck up in a small town, but you can't be a fuck up in a small town. That, in my mind, is the big difference between ND and C, and a state bank won't make a shits worth of difference for C.
Regards,
Cooter
Racist.
Sorry if this has been posted before, but this is an example of the stupidity we all face, "the state is struggling to meet its budget with a vastly shrunken tax base. What it needs is a new source of revenue, something that won’t squeeze consumers, homeowners, or local business."
How about slashing the budget? I trust the state a lot more than the Federales provided the banksters grubby hands are kept out of the till.
Here is how this might work:
California creates its own bank.
All California state pension funds are deposited in the bank.
California's bank "invests" in California debt (which no one else is anxious to buy).
California eventually defaults on its debt.
The FDIC pays the losses resulting from the default, meaning that US taxpayers get left holding the bag.
So basically the bank is a way for California to spend all of the money in it's workers pension funds, leaving Uncle Sam with a large bill.
From California's point of view, this is a great idea. For the rest of the US, not so much.
That makes so much sense. Thank you!
Regards,
Cooter
Dude - don't give them any ideas. The muslim has been bailing out blue states since early 2009 with tens or hundreds of billions. CALPERS was well run many years ago before Dem scum took over.
Huh?Muslims? Ar eyou kidding me?
California has been sending more taxes to Washington than it recieves for decades. Unlike Red States.
The H1-B visa has ruined California. Instead of domestic tech workers making good money and paying lots of taxes, salaries have been driven down dramatically, and few techies, unless they've been in the industry for decades, can even afford home ownership in California.
Things certainly will get considerably more fun when Ponzi schemes like GOOG, NFLX, Facebook, etc., finally collapse.
I am a techie who cannot afford a house in Cali - but I am not so crazy to put the blame on salaries. You need a real(i)ty check, dude.
If H1-B's hadn't been brought in to replace US tech workers like scabs, salaries may very well have risen sufficiently after the dot-com bust was cleaned up, such that, the house prices would have been affordable for tech workers.
Sounds more like searching for a scapegoat to me, while rationalizing the house price bubble...
If you are a techie in Cali, you should think long and hard about where is the best place for you to be for the next five to ten years ... given of course you can't buy a house and are mobile.
Regards,
Cooter