You Probably Should Get a State Bank

Right now, there are INSANE budget cut proposals happening here in Washington State.  Governor Chris Gregoire said, "I hate my budget," tearing up toward the end of her press conference Wednesday. "I hate it because in some places, I don't even think it's moral."


Wow.

A campaign is underfoot in Washington state to create a public state bank.  Only one such bank exists in the nation, The Bank of North Dakota, and it's been around 1919.  Basically, all tax money and fees collected goes to the state bank, and the bank then loans it out to self-fund capital projects, keep money local, subsidize student loans and provide new credit sources.  Check out this Mother Jones interview with the current president, Eric Hardmeyer.  Hardmeyer said, "We also provide a dividend back to the state. Probably this year we’ll make somewhere north of $60 million, and we will turn over about half of our profits back to the state general fund. And so 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 types of needs." And this from a state with a population of 600,000.


So what happens with your tax money now?  "The Office of the State Treasury uses tax monies now for short term investments in big banks, Federal treasury bonds, Fanny Mae etc." (JUSE). Creating a state bank wouldn't put private banks out of business.  There seems to be a lot of partnering between the Bank of North Dakota and private banks.

Ellen Brown offers an overview of the 7 states (Florida, Oregon, Illinois, California, Washington State, Vermont, and Idaho) with active campaigns to form state banks in her Mar 20 2010 article, The Growing Movement for State Owned Banks.

Below I'm posting the talking points for the Washington State bank campaign from Just Sustainable Economy Study Group, a Project of Western Washington Fellowship of Reconciliation.

10 reasons for a Bank of Washington State

1. During this 2011 legislative session a bill will be introduced in the Washington State Legislature
to charter a Public Bank, This is a Public, not for profit bank.

2. A Bank of WA would be modeled after the Bank of North Dakota. The Bank of North Dakota
(BND) has helped North Dakota prosper even during these recession times. The bank is
conservative and did not participate in risky behavior. North Dakota is the only state in the
Union that is not suffering a budget deficit and they have the lowest unemployment in the
nation 3.8% (October 2010). No local banks have failed. www.banknd.nd.gov/

3. Washington State is running huge deficits that cause public programs to be cut, negatively
impacting Washington’s citizens. We have an unemployment rate of 9.2% and 14 community banks
have failed. We need more available state funds.

4. When the state collects its taxes and fees it puts 70% of that money in local branches of the big
Wall Street banks. Any money not immediately spent goes into short term investments in those
banks, treasuries and small commercial banks. Currently, despite record low interest rates, Banks
are lending even less and big banks are instead speculating on world markets and handing
out massive bonuses to their executives.

5. A Bank of Washington State would have the ability to self-fund capital projects, keep money
local, make small business loans and provide new credit sources.

6. The Mission of the bank will be written into the law establishing the bank: Develop
agriculture, industry and commerce for benefit of the citizens of Washington State.

7. Like the BND the bank of Washington State would partner with community banks and
credit unions in their loan practices. The BND is well thought of by banks in that state and acts
as a “mini-Fed”. As small businesses and farmers can get credit, jobs will be created; this in turn
will increase the revenue tax base of the state.

8. There is a great deal of public outrage over bailouts and banker bonuses and banks on the
national level have not been adequately regulated to prevent future risky lending and investments.
This is not a good place to put taxpayer money. A public bank would eliminate the costs that the
state pays to these big banks for banking services.

9. All tax moneys and fees of Washington would be deposited in the state bank. The bank
would be a member of the Federal Reserve so that it could have access to the cheapest money
available through the Federal Reserve Discount Window.

10. The chartering of a public state bank will not solve all the problems of the recession. However,
there is a credit problem in Washington State at the present time and the bank will get credit
flowing to where it is needed. Profits not needed for the operation of the bank could be redirected
back into the state general fund.