Opinion: Western states ignite the public banking revolution
In the world of banking and finance, there is now a quiet revolution brewing, as potentially significant as the revolt against the costly and ridiculous War on Some Drugs (marijuana) led by Colorado and Washington.
This revolt, too, is brewing not in the national power centers — D.C. and New York — but in the states, and especially the Western states. The role model is North Dakota, and the spreading revolt is against the pirates and shysters on Wall Street largely responsible for crippling our broader economy in recent years, while their own profits continue to soar.
For more than 90 years, North Dakota has operated the nation’s only state-owned bank. Against well-funded opposition by Wall Street, it was eventually birthed in 1919 by populists in the Non-Partisan League, as an alternative to relying on out-of-state predatory speculators who had devastated North Dakota’s economy (sound familiar?). The bank has used deposits, rather than bond sales, to fund public infrastructure, schools, mass transit, pension funds, agricultural projects, energy self-reliance, and small-business entrepreneurs with low-interest loans that lower the tax burden, since vast sums for exorbitant interest rates are not sucked out of the state (interest payments account for up to 50 percent of the cost of many infrastructure projects). The state bank has also helped stabilize local and regional private banks during business cycle downturns.
“Really what separates us [from private banks],” states BND president Eric Hardmeyer, “is that we plow these deposits back into the state of North Dakota in the form of loans … over the last 10, 12 years, we’ve turned back a third of a billion dollars just to the general fund to offset taxes or to aid in funding public sector needs.”
Compare this to a novel form of loan sharking the Wall Street banks have begun since the 2009 economic crisis they created devastated state budgets; in desperation, 1,350 school districts and state and local agencies have taken up “capital appreciation bonds” to ease their shortfalls — no payments due for up to 20 years, when the compound interest at 14-15 percent (versus 1 percent by a state-owned bank) will have ballooned to blow whopper holes in the state or city budgets and cost taxpayers up to seven times the amount of the original loan.
And, adding insult to injury, our taxpayer dollars already subsidize the private banks to the tune of a .08 percent point for borrowing costs (according to a study by researchers at the International Monetary Fund and the University of Mainz). Multiplied by the total liabilities of the 10 largest U.S. banks, this adds up to a $83 billion per year subsidy — very close to the total profits of these banks.
In addition to unregulated speculation in oil and food futures that has driven up the price of energy and food across the world, the Wall Street hustlers have found a new body to bleed — the body politic.
But more and more states are taking their cue from North Dakota’s proven record. Montana, Washington, California, Arizona, Illinois and Maine now have bills pending to form a state-owned bank. Twelve other states have either another type of state bank bill in the works, or initiatives to implement such, including Colorado. Just as Wall Street fought to kill North Dakota’s public bank in 1919, it is sure to aggressively target these initiatives that threaten its blood money.
In the polarized political discourse paralyzing the nation today, you’re either a laissez-faire Capitalist or you’re a crypto Communist — like you’re either a Broncos fan or a Chargers fan. There’s no middle ground.
Unlike sports, however, politics involves the art of compromise, and the real art of government is finding the balance between too much and too little regulation of the economy. A survey of the most successful economies today (Germany and China) indicates a mix of private and public sector financing is ideal.
Already I can hear puritans on the Right assail these initiatives as “socialism” as they studiously ignore the massive bailouts and subsidies (corporate welfare) that have insured Wall Street’s record profits as states and municipalities lay off police and firemen, close schools, and the rest of the economy stagnates. There is a distinction to be made between productive capital and speculative vulture capitalism. There is a distinction between finance and usury (excessive interest), defined throughout most of Western civilization as a sin and crime.
So the next time you hear a Chamber of Commerce ideologue denounce public banking as a communist plot, remember that Goldman Sachs and company’s profits are increasingly coming out of your and your children’s wallets.
Free Press columnist Travis Kelly is a web/graphic designer, writer and cartoonist in Grand Junction. See his work or contact him at http://www.traviskelly.com.
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