The Rationale for State-Owned Banks
By Lorenzo A. Canizares
Michigan has an unemployment rate of 14 percent, and has been particularly hard hit by the economic downturn. Verg Bernero, Mayor of Lansing, the state’s capital, and a leading democratic candidate for governor, proposes to relieve the state’s 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; it could also help community banks by buying mortgages off their books and working with them to fund development projects.
Bernero’s proposal should be seriously considered given the political state of the nation right now since Republicans and Wall Street have combined forces to impede any possibility of the Obama administration fixing the economic problem created by their recklessness. Their strategy is to dictate by stalemate, the Party of “NO,” using that filibuster! Consequently, Bernero’s words ring even louder “Hundreds of jobs-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.”
Ellen Brown, a litigation Attorney from Los Angeles turned researcher who has done superb work letting the nation know about the state of North Dakota’s thriving economy, says “Bernero joins a growing a list of candidates proposing this sensible solution to their state’s 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.”
Where are we now? We have a severely depressed economy – and that depressed economy is inflicting long-term damage. The national unemployment rate is 9.5% as of 7/2/10, or 15 million people. The rate jumps up to 16.6% if we count part-time workers that need full-time jobs and those who stopped looking. Plus 6.8 million have been out of work longer than six months. Nobel Prize economist Paul Krugman says “Every year that goes by with extremely high unemployment increases the chance that many of the long-term unemployed will never come back to the work force, and become a permanent underclass. Every year that there are five times as many people seeking work as there is job openings means that hundreds of thousands of Americans graduating from school are denied the chance to get started on their working lives.”
The time is ripe for state-owned banks. The American people, the vast majority of them, have identified Wall Street as the main enemy. Many Americans that poll against Obama are doing so on the belief that he is too chummy with Wall Street. According to a Gallup poll released in mid-June the number of Americans that see themselves as conservatives rose to 42%. This poll has to be put in the context that many Americans view the Wall Street “feast” as a result of liberal policies that have allowed this kind of economic behavior. The American people realize that Wall Street has us in a barrel. Obama and the Democrats are paying dearly for prevailing political misconceptions that Obama’s policies have produced record deficits while not providing jobs. Somehow the nation has been allowed to forget that Republicans cut taxes twice while starting two wars. It’s in the Democrats self-interest to find ways to energize the economy without having to beg cooperation with those that want them to fail.
Back to Ellen Brown, in an article published 3/18/10 for Yes! Magazine she states she had been tracking candidates in five states running on a state bank platform and one state (Massachusetts) has a bill pending. One month later, there are three more bills on the rolls – in Washington State, Illinois and Michigan – and joining Bernero as a candidate of proponents is Gaelan Brown of Vermont, who is running for the State Senate. That brings the total to seven candidates in as many states (Florida, Oregon, Illinois, California, Washington State, Vermont and Idaho) campaigning for state-owned banks, including three Democrats, two Greens, one Republican (yes, Virginia there are still a few decent Republicans left), and one Independent.
Gaelan Brown says on his website, “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 time has come to undress the crown prince, the Bank of North Dakota. This is how Ellen Brown describes it “The Bank of North Dakota, currently the nation’s only owned state bank, is the model (with variations) for all the other proposals on the table. The Bank of North Dakota acts as a “banker’s bank,” partnering with other banks in “participation loans” which allow them to compete with larger banks. In a participation loan, the community bank originates the loan and takes responsibility for it, while the participating banks 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 provides liquidity for more than 100 banks around the state.” It is important to add for naysayers’ sake that the Bank of North Dakota was founded in 1919. Last year North Dakota had the largest surplus it ever had. It was the only state adding jobs when others were losing them. In March 2009, when 46 of 50 states were in fiscal crisis, the Council of State Governments noted that North Dakota was in the enviable position of discussing tax cuts and looking for ways to spend its 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.
Other states are crying uncle. They need find ways to help their own people. They need to liberate themselves from the economic limitations imposed by Wall Street financial recklessness. There is a MAJOR difference between seeking profits and unbridled greed. Our nation developed the world’s largest middle class because we created the regulations to keep unbridled greed under control. We need to find our way again or all hell might break loose.