Austerity, budget deficits, spending cuts, sequestering, sale of public assets, and raising taxes—-these are the unnecessary solutions being proposed by private banking interests and their minions; but the nations', states', counties', and cities' budget crises did not arise from too much spending or too little taxation. They arose because the world's largest banks, on Wall Street and in the City of London, froze credit and choked the money supply.
As noted in our previous post, this strategy on the part of the world’s most powerful banks has been going on for centuries. Now it's up to the public to take back control of the money supply, thereby restoring U.S. sovereignty, and subsequently to provide credit and infuse currency into local, state, regional, and national economies.
How?
The Federal Reserve could provide the stimulus in the same way that it provided over $16 trillion in liquidity and short-term loans (between December 2007 and July 2010) to the "too big to fail" (TBTF) banks that own it. (This is more money than the entire U.S. debt accumulated over the past 237 years.) But the Fed has no intention of doing this—-not because it would be too costly (the total deficit of all the states comes to less than 2% of the credit advanced for the bailout of the rapacious banks)—-but because it is not part of the Fed's legal mandate, or so they claim. More honestly, the financiers who own the Fed use it to choke the money supply and thereby acquire others' hard-earned assets.
Any policymaker truly interested in repairing the situation, including increasing lending, particularly to small businesses, the hardest hit by the credit squeeze, must consider the creation of an institution modeled on the Bank of North Dakota (BND)--currently the only state-owned bank in the country--and many of the original 13 colonies, which owned their own banks. The BND has a 94-year history of safe, secure, and highly profitable banking in the public interest. North Dakota has the lowest unemployment and foreclosure rates in the country; and, during the present contraction, while other states are foundering, has the largest budget surplus in its history. The private banks and their apologists will try to convince you this is due to the oil boom, but the Bakken oil fields are a recent development (2008), and one that is proving more a boondoggle than a boon.
Since 2010, 20 states have introduced bills either to form state-owned banks or to do feasibility studies to determine the potential of publicly owned banks. Some cities and counties are also considering such an initiative. Publicly owned banks are a win-win for the 99.99999%. Objections are usually based on misconceptions or lack of information.
Proponents stress that a publicly owned bank, based on the BND model:
1. Generates new revenues for cities, counties, and states, directly through transfers of publicly owned bank surpluses (profits on loans), and indirectly by creating jobs and spurring local economic growth.
2. Lowers interest costs for governments. Public banks have access to low-cost funds from the Federal Reserve System and various government programs. The banks can pass savings on to the local governments that own them, when they finance infrastructure repair, replacement, or creation. The banks also may provide Letters of Credit to underwrite tax-exempt bonds at lower interest rates; or, help a city, county, or state issue a new bond at an interest rate lower than it could negotiate on the open market; or, buy bonds already issued and traded on the bond market, with interest payments then diverted to the city, county, or state, saving 40 to 50% of costs (interest charges on long-term capital investments).
3. Builds small businesses. In markets increasingly dominated by large corporations and the banks that own them, public banks provide essential lending to small businesses, to keep them competitive. Private banks have purposely cut credit lines and loans to small businesses, driving many small businesses owners to use their credit cards (at much higher interest rates) or to go out of business.
4. Stabilizes local independent banks. In North Dakota, the BND serves the role of a mini-Fed, providing correspondent banking services to virtually every financial institution in North Dakota, including a Federal Funds program with daily volume of $330 million, check clearing, cash management services, and automated clearing house services. However, in most states, the independent bank associations have been hijacked by the large commercial and investment banks, so they opposed public banks.
5. Remains independent of private banking and corporate interests. Although the BND is a member of the Minneapolis Federal Reserve Bank, it is insured by the "full faith and credit" of North Dakota, not the privately controlled FDIC. This avoids unnecessary risk and expense, since the BND’s chief depositor is the state, and the state’s accounts are significantly larger than $250,000, the maximum covered by FDIC insurance.
6. Provides accountability, transparency, and prudent risk management. Publicly owned bank employees do not receive bonuses for short-term profits and speculative investments, in contrast to the TBTF banks, which thrive on such recklessness (since they own the Fed and bail themselves out after each self-inflicted bankruptcy). Also, audits of publicly owned banks are public information, unlike private banks, such as the Federal Reserve, which have never been transparently audited.
7. Creates new jobs and spurs economic growth. According to a 2010 study by the Center for State Innovation, if Washington State had a fully-operational publicly owned bank capitalized at $100 million during the present recession, it would have supported $2.6 billion in new lending and helped to create 8,212 new small business jobs. Likewise, a proposed Oregon bank would help community banks expand lending by $1.3 billion and help small business create 5,391 new Oregon jobs in its first three to five years. The population of Colorado falls roughly between that of Washington and Oregon.
8. Is self-funding and self-sustaining. The BND keeps federally-guaranteed funds in the state and uses the profits on these to build a capital surplus from which loans are made to local businesses. The BND has a return on equity of 25-26% and has contributed over $300 million to the state (its only shareholder) in the past decade—a notable achievement for a state with a population of approximately 670,000.
9. Keeps local monies on Main Street, partnering with community banks by leveraging public funds into credit for local purposes, funds that would otherwise leave the state via Wall Street banks and be leveraged abroad, creating economic multipliers and jobs elsewhere.
10. Strengthens local banks by acting as a counter-cyclical ballast during periods when the private banks are choking the money supply, thus easing credit shortfalls and preserving competition in local credit markets. There have been no bank failures in North Dakota during the current financial crisis. By purchasing local bank stock, partnering with local banks on large loans, and providing other support, state and other publicly owned banks strengthen independent banks.
11. Stops the theft of public resources. The major central banks and largest commercial and industrial banks own the key corporations at the core of the global economy as well as the most powerful governments (including their intelligence services and armed forces). These banks are not only attacking and destroying all nations that control their own banking and currency (Afghanistan, Iraq, Iran, Libya, Syria, Tunisia, Egypt, North Korea, etc.), but (after choking the money supply and destroying tax bases) are privatizing government functions, profiteering in virtually all aspects of life, including armaments, medicine and drugs, insurance, education, housing, media, and food. All key financial markets are now controlled and rigged by the financiers at the top of the system. In addition to all the frauds listed in our previous post, a new one should be added: stealing money from depositors. Clearly, public monies should be deposited in public banks, which operate in the public interest.
Copyright 2013, Robert Bows
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[We are pleased to announce that our book, 7 Steps to Global Economic and Spiritual Transformation, is now available online at Amazon and at Barnes and Noble.]
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