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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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Yep, that's what I'm doing for 15 months now, but have a girlfriend here who wants to stay put.
Personal complications (recovering from an accident) pushed out my internal deadline, but in 3 to 6 months from now I will make a decision which she might not like.
Backed by Gold? Open a State run bank with deposits backed by gold and silver....or a basket of PMs.....I suspect you would see their business "shine"..so to speak.
Private Banking is a total failure in our nation. Lets experiment with a State run bank....why not?
California has become a one party state where the democrats pander to the 'diversity' while driving small businesses and the middle class out of the state. Soon it will be like Mexico with 1% of the population controlling everything and everyone else living in a tin shed. Even a state bank won't save Calif. because the politicians and friends will get all the loans and use of the money while everyone else will be starved of credit. Lots of taco stands and drug dealing and no real industry. Even the state and federal parks are being used to grow marijuana and anyone who stumbles on to them is quickly killed. In time it will collapse on itself. Personally I can't wait.
Its much, much more dynamic than just some quasi-marxist state bank. You're dead on right - the variables, some of which you mention, go to the heart of the issue.
Wonder if California can print money in some form if they have a bank.
No. But they can coin money.
Thanks but no thanks Ill be my own bank tyvm. I dont trust any of these assholes anymore.
Bring it!
This concept is a dream of many within the NorCal community, especially the new Berkeley mafia. The key to the process in Cal will be to establish STRONG sense of mission and transparency in state bank operations. Cal has huge issues with graft and corruption at the county/local level, especially in SoCal, not to mention layers of fluff at the state level that will need to be seriously quashed if a state bank is to survive and thrive in its intended purposes.
Drive on and thanx for the nug ilene and Ellen.
"For all states to look at North Dakota’s model and say this would be the panacea to all those things, I don’t see that happening" Eric Hardmeyer BND president.
http://m.motherjones.com/mojo/2009/03/how-nation%e2%80%99s-only-state-ow...
There are no panaceas. That doesn't mean that a good idea should be discarded because it's identical form is not transferable. Some folks call this process local adaptation. One size fits all is a centrists dream, be they governing libertarians, Soviet Leninists or JMKist monetary central planners.
The State Bank Proponents gave a recent proposal at a Campaign for Liberty meeting in Seattle. After they did their presentation, people were less than enthused since:
It does nothing to address the Federal Reserve control of the currency issuance.
It does nothing to stop fractional reserve banking.
The people proposing it were the SEIU and other progressive groups who seemed to feel that it would just be another way to provide them with a big cookie jar that they could take money out of for special interest projects, such as "green energy" and such.
North Dakota is not the same as Washington State. It is primarily a big Agra-business state. Just about everyone else has left, so it does not have a big population for welfare and entitlements, which has caused it's economy to look better on paper and it's State budget not to get out of control.
CALPERS became a big cookie jar for unions, Dems and their cronies to loot.
The people in ND say the -45 degree winters keep the criminal scum out.
That's why the Calpers system was changed under governor Reagan. After all, he was a union official too.
Get a clue. I suggest you return to the Yahoo message boards for some seasoning before you make a bigger fool out of yourself here in the bigs
They could print their own currency, and say shine it to the Fed altogether. Berkshares are working well back east. They just couldn't mint coins. But since there is no Fed interest on coins, that wouldn't matter anyway.
I've been wondering for quite some time why more state governments didn't adopt a policy similar to this. Get off the Fed's teet once and for all.
Stupid phone...
Local government trumps central government? I'm shocked.
/sarc
Who is charge of setting up the Bank's managers? Who are the loan officers going to be? How are they going to determine what projects to lend to? Boy I can see this turning out just great, Solyndra on steroids.
Prop 13 caused the deficit? So as the world's 6th largest economy collecting all the tax revenue it does through the myriad of taxes and fees that we pay, that is not enough to balance a budget?
Actually, most of the taxes and other fees collected in Cal are collected by federal means then transferred to the welfare queens known as red states who live off the federal looting of the productive labor of others. Return dollar for dollar and we'll see soon enough ...
MexiFornia would need many "wise Latinas" running the bank and looting along with usual union, tort bar, illegals et al.
What next?
States issue their own currency(at no interest) without referring to the treasury or the Fed?Yeah right.Lincoln was the last to try that and look what happened to him.
Yes, by all means let's listen to greenbacker print-lots-of-money Ellen Brown.
Agreed.
She is an idiot. She was completely taken to the woodshed by Gary North. Absolutely evisercated the idea of the state banks. The greenbackers are obsessed with the myth that the federal reserve is "private" and that all we need to do is nationalize the banks and lend money to the government at no cost. As if that's not what's already going on. "They can print this money at will, let's give it to the government. That way they'll never go bankrupt." Like a child who realizes they can never lose at Monopoly by simply stealing from the bank.
Ellen Brown is a decades-old gimmick with a complete lack of sense, ethics, or historical facts. Read it as you would a Far Side cartoon.
Run pension funds! Run for your lives! Pension funds remind me of junk food & they would probably respond by saying, " I can't run, I am full of hamburger!" They are indeed the next target of the puppet masters........
The economic strength of ND has nothing to do with having a state bank.
The state allows the development of the natural resources.
If California wanted to follow the ND route to economic strength, it would first allow offshore drilling. They get employment and royalty/tax revenues from the production.
offshore drilling?
brilliant fucking idea, einstein!!!
look, there's a spot on the planet that actually not completely filthy and polluted: most of ca's coastline.
quick, we need to do something about that!
where do you live, anyhow, slums of detroit or something?
There is off shore drilling in Cal. Lots of it. Try again
fortunately it is limited by california coastal commission
Mainer here...yes, we had a bill for a state bank. We also had a bill in to require the banks to show the mortgage notes on any property they wanted to foreclose on.
I was involved with both.
Bank of America moved into the state full force eight years ago.
It is now the primary funder of the Maine State Bankers' Association...and their lobbyists.
So....where do you think our bills ended up?
Bank of America owns our legislature.
And as far as foreclosures go in this state? Hey, we are wide open for fraud -- and not only that, its been legitimized by our legislature.
So, if there's any property here in Maine you kind of fancy? All you have to do is hire a lawyer and file to foreclose on it.....No one in our courts is going to make you prove a damn thing.....
And Mainers are all too poor now to fight you in court....soo.....
our biggest real estate broker is Masiello....Masiello.com will show you all the fantastic waterfront properties you might want to steal....
Is the bill in Maine dead, or do you just think there's no way it's going to pass? Thanks.
Mainer here...yes, we had a bill for a state bank. We also had a bill in to require the banks to show the mortgage notes on any property they wanted to foreclose on.
I was involved with both.
Bank of America moved into the state full force eight years ago.
It is now the primary funder of the Maine State Bankers' Association...and their lobbyists.
So....where do you think our bills ended up?
Bank of America owns our legislature.
And as far as foreclosures go in this state? Hey, we are wide open for fraud -- and not only that, its been legitimized by our legislature.
So, if there's any property here in Maine you kind of fancy? All you have to do is hire a lawyer and file to foreclose on it.....No one in our courts is going to make you prove a damn thing.....
And Mainers are all too poor now to fight you in court....soo.....
our biggest real estate broker is Masiello....Masiello.com will show you all the fantastic waterfront properties you might want to steal....
Here in Cali, all the boogie-man Prop 13 did was re-jiggle where the money comes from, we have among the highest sales and income taxes in the country. In Cali as at the Federal level the problem is spending not taxes! Gov Brown since coming in has doubled down on our banana republic reputation by catering to all his special interests groups especially public employee unions.
Prop 13 just created tons of unintended consequences. I bought a place in 2004 and paid more in taxes in 18 months than the previous owner did in the entire 35 years they lived there. That's fair. They also lied on their permits and cheated the County on 3 different remodels to the same property, never getting final inspections - of course to avoid the taxes...of course, I had to pay to fix their issues and of course, the GD real estate law took years to wring anything out...
Prop 13 was and is a very dumb idea. The only consequence is that it unfairly distributes property tax burden on younger people. The original idea was to kill run away govt by taking away the tax...this did not happen.
Resource rich? Yes. Harvestable? NFW. Too many real and wannabe hippies for that. Who needs to harvest all that offshore oil and gas when Solyndra can make solar panels? Just ask Obama and his buddy Kaiser.
I know North Dakota and you, California are no North Dakota. You can bet your sweet Bakken Frakken bippy on that one.
in order for government to raise revenue despite prop 13, government favored policies to inflate assets. Increase asset values with same percentage of taxation = increasing percentage of taxation on stagnant asset values. No real surprise since Nancy Pelosi's millions come from her husband's real estate business.
CA mainly inflates assets via:
This is at the cost of California born upper middle class tax payers and young American families recently moving into California.
See exodus of 20-40 year old college educated folks moving out
What the bull is this:
because of Prop 13!! B.S. state revenues never fell off. The state government went on a spending binge. Property turns over very fast in California and thus gets reassessed for property taxes. Without Prop13 five million Californians would be forced out of their homes.
California does need a bank. States should never send their money to Wall Street. Invest in the state.
California does need a bank. States should never send their money to Wall Street. Invest in the state.
TRUTH!
If there is going to be a prop 13 type limitation make it limiting how much the federal can loot from states absent a war declared by the congress as specified under the constitution.
We'll go over your misplaced perceptions concerning how property taxes are figured and assessed in Cal another time. I'm sure the opportunity will present itself. Meanwhile I suggest you read up on how the process actually works relating to how fast and how far assessments can move up or down. Tons of folks, especially in the inland empires of NorCal & Socal are discovering this, much to their sorrow
Proposition 13 is bullshit. Two people who live on the same street. One person bought their home in 1985 and pays $1k in taxes a year. Someone bought in 2009 and they are paying $8k. How the fuck is that fair? Proposition 13 does nothing except shift the tax burden away from the old and onto the young (just like Social Security, Medicare, and all the other goddamn programs).
I could easily pay cash for a house in California. Will I do it? Fuck no I won't, and a big reason is Proposition 13. If you think I'm going to fund this BS government while some debt-laden baby boomer pays nothing, my answer is: fuck you. I'll continue to rent nice homes on the cheap until this bitch implodes, and then I'll buy it off of some stupid boomer for a song.
Prop 13 limited tax to 1% cash value per year, so a house with $8,000 per year tax would be a damned fine house almost anywhere except a few of the wealthier enclaves like La Jolla and Rancho Santa Fe. I try, really I do try, but I just cannot quite bring myself to feel sorry for those poor fuckers living in $800,000+ homes who think 8 grand is too much to pay in taxes. If you cannot afford $8000 in property tax then maybe a better idea would have been to buy a house upon which the taxes were comfortable for you.
As to the idea of shifting costs to the younger, not everything about life is fair. I was 18 that year and it was my first election to vote in. I voted against it because Jerry Brown was against it ( he later changed his mind and as governor implemented it well), and because that old shitbag Howard Jarvis pushing 13 wanted a Nazi theocratic state where there were no public goods, only private, private schools, private toll roads, private mass transit, and everything priced accordingly.
Older people were being forced out of their homes by property taxes, their taxes went up and up and up while they were on a fixed income. Was 13 the best way to handle it? They could well have set up a program that exempted the fixed income set from increases without 13, but as an older and wiser person now I think 1% per year of house value is all anyone should ever have to pay in tax on property.
Face it dudes, property taxes are the most unfair form of taxation. If you improve your house, green up the yard, add solar panels you are taxed forever for your good deed. Do you own your house? No. You are paying rent to the government. Why should anyone be kicked out their house for not paying extortion money to the bigest mafia around?
All property taxes should be eliminated.
yes, all RESIDENCES should be excluded.
but, as for commercial ag (read: mega-farms...which shall soon be 'liquidated' -- sorry german and british and japaneese land owners who've NEVER EVEN BEEN to alabama or mississippi! "your" land will soon be parceled...and that mule we promised, well, we'll be deducting that from your accounts as well), and land that is a function of pubic resource, but held in private hands?, on my, yes, TAX the HELL outta dose bitchez!
supply side, your days are numbered!
countin down,
janus
Yes, because giving more money to the Sacramento central planners sounds like such an excellent idea....
North Dakota is NOT comparable to California. As the article notes, Cali has been hollowed out from entitlements, while ND has experienced a growth period. These two states could not be more different, and for anyone to make the case otherwise is an idiot.
A California State Bank would be just another avenue for wealth transfer of OPM.
Yeah, in California there are hardly any barnyard animals to fuck.
So you guys fuck little children and your brothers
no...just the wives daughters and mistresses of the rich.
i've had tons of success in that regard.
i can name four very well known politicians whose female relations have had their ankles pinned behind their ears by the one and only....
JANUS
This is a great idea. And in truth, Wall Street banks already are state-owned. Meaning, the state (public) owns all of their toxic assets and backstops them via the Fed, yet any profitable enterprise lines bankers' pockets via the end-of-year orgy bonus. Hell, the entire financial sector is backstopped (AIG and Eurozone $ swap, anyone)?
So, fuck it. We do not have capitalism, and anyone who says we do is a liar (look up LTCM, then come tell me about capitalism). Remit these profits back to the state.
Uh, North Dakota has a lot less people than California and probably less than 1% living off welfare and other government handouts. ND could probably afford to give every resident $25k a year in oil and gas subsidy payments if it enacted a 1% tax on resources. The corporations would be happy to pay the 1% since the profit potential is so high. ND also gets a lot of revenue from being a tax shelter for corporations, or is that South Dakota. I can't remember. Point is what works in North Dakota is a long way from working in CA.
Property taxes should be abolished across the board considering it means that nobody actually owns their land even if it has been paid off for generations.
The state banks would still have to get dollars from the US Treasury so couldn't the feds just turn off the supply to the state banks?
Perhaps if every state had its own currency? Oh wait that was actually tried wasn't it. It actually did work out ok for a while.
I got as far as California used to be a Liberal Showcase, and stopped reading. California is fucked so many ways its pitiful. All the state banks in the world can't fix California. All your points about the complete fatuous idiocy of comparing Calif. and N. Dakota are correct, of course.
The author perhaps is not aware that Prop.13 may be an attraction to many homeowners, as it was originally sold to voters, but is misunderstood because it is/was a scam for commercial real-estate. Homeowners were exempted from reassessment and increased tax until they sold the property.
E.g., if a CRE property is owned by 17 persons, who form under a corporation or other shell, then the property can be purchased indirectly by selling the corporation. The ownership of the property does not change as it is still owned by the same corporation. Thus it is not reasssessed and is taxed at its earlier valuation.
As I am clearly not a CRE lawyer, I advise any who want to understand this to seek pro counsel.
Not alot of entitlements in ND. If you don't work, you are left outside to freeze dry.