{"id":4769,"date":"2017-04-22T13:44:46","date_gmt":"2017-04-22T20:44:46","guid":{"rendered":"http:\/\/occupysf.net\/?p=4769"},"modified":"2017-04-22T13:44:46","modified_gmt":"2017-04-22T20:44:46","slug":"bank-even-socialist-love-david-dayen-occupy-com","status":"publish","type":"post","link":"http:\/\/occupysf.net\/index.php\/2017\/04\/22\/bank-even-socialist-love-david-dayen-occupy-com\/","title":{"rendered":"“A BANK EVEN A SOCIALIST COULD LOVE” by DAVID DAYEN (occupy.com)"},"content":{"rendered":"

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\u201cMoney is a utility that belongs to all of us,\u201d says Walt McRee. McRee is a velvety-voiced former broadcaster now plotting an audacious challenge to the financial system. He\u2019s leading a monthly conference call as chair of the Public Banking Institute (PBI), an educational and advocacy force formed seven years ago to break Wall Street\u2019s stranglehold on state and municipal finance.<\/p>\n

\u201cThis is one of the biggest eye-openers of my life,\u201d says Rebecca Burke, a New Jersey activist on the call. \u201cOnce you see it, you can\u2019t look back.\u201d<\/p>\n

This ragtag group\u2014former teachers, small business owners, social workers\u2014 wants to charter state and local banks across the country. These banks would leverage tax revenue to make low-interest loans for local public works projects, small businesses, affordable housing and student loans, spurring economic growth while saving people\u2014and the government\u2014money.<\/p>\n

At the heart of the public banking concept is a theory about the best way to put America\u2019s abundance of wealth to use. Cities and states typically keep their cash reserves either in Wall Street banks or in low-risk investments. This money tends not to go very far. In California, for example, the Pooled Money Investment Account, an agglomeration of $69.5 billion in state and local revenues, has a modest monthly yield of around three-quarters of a percent.<\/p>\n

When state or local governments fund large-scale projects not covered by taxes, they generally either borrow from the bond market at high interest rates or enter into a public-private partnership with investors, who often don\u2019t have community needs at heart.<\/p>\n

Wall Street banks have used shady financial instruments to extract billions from unsuspecting localities, helping devastate\u00a0places like<\/a>Jefferson County, Alabama. Making the wrong bet with debt, like the Kentucky county that built a jail but couldn\u2019t fill it with prisoners, can cripple communities.<\/p>\n

Even under the best conditions, municipal bonds\u2014an enormous, $3.8 trillion market\u2014can cost taxpayers. According to Ellen Brown, the intellectual godmother of the public banking movement, debt-based financing often accounts for around half the total cost of an infrastructure project. For example, the eastern span of the San Francisco-Oakland Bay Bridge cost $6.3 billion to build, but paying off the bonds will bring the price tag closer to $13 billion, according to a 2014 report from the California legislature.<\/p>\n

Public banks reduce costs in two ways. First, they can offer lower interest rates and fees because they\u2019re not for-profit businesses trying to maximize returns. Second, because the banks are publicly owned, any profit flows back to the city or state, virtually eliminating financing costs and providing governments with extra revenue at no cost to taxpayers.<\/p>\n

\u201cIt enables local resources to be applied locally, instead of exporting them to Wall Street,\u201d says Mike Krauss, a PBI member in Philadelphia. \u201cIt democratizes our money.\u201d<\/p>\n

Legislators, Brown says, commonly object that governments \u201cdon\u2019t have the money to lend.\u201d But this misunderstands how banks operate. \u201cWe\u2019re not lending the revenues, just putting them in a bank.\u201d That is, the deposits themselves\u2014in this case tax revenues\u2014are not what banks loan out. Instead, banks create new money by extending credit. Deposits simply balance a bank\u2019s books. Public banks, then, expand the local money supply available for economic development. And while PBI has yet to successfully charter a bank, there\u2019s an existing model in the unlikeliest of places: North Dakota.<\/p>\n

During the Progressive Era, a political organization of prairie populists known as the Nonpartisan League took control of the state government. In 1919, they established the Bank of North Dakota. It has no branches, no ATMs, and one main depositor: the state, its sole owner. From that deposit base, BND makes loans for economic development, including a student loan program.<\/p>\n

BND also partners with local private banks across the state on loans that would normally be too big for them to handle. These loans support infrastructure, agriculture and small businesses. Community banks have thrived in North Dakota as a result; there are more per capita than in any other state, and with higher lending totals. During the financial crisis, not a single North Dakota bank failed.<\/p>\n

BND loans are far more affordable than those from private investors. BND\u2019s Infrastructure Loan Fund, for example, finances projects at just two percent interest; municipal bonds can have rates roughly four times as high. And according to its 2015 annual report, the most recent available, BND had earned record profits for 12 straight years (reaching $130 million in 2015), during both the Great Recession and the state\u2019s more recent downturn from the collapse in oil prices. A 2014\u00a0Wall Street Journal story<\/a>\u00a0described BND as more profitable than Goldman Sachs. Over the last decade, hundreds of millions of dollars in BND earnings have been transferred to the state (although the overall social impact is somewhat complicated by the bank\u2019s role in sustaining the Bakken oil boom).<\/p>\n

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THE LONG MARCH THROUGH THE LEGISLATURES<\/h3>\n

Brown founded the Public Banking Institute in 2010, after years of evangelizing in articles and books such as\u00a0The Web of Debt: The Shocking Truth About Our Monetary System and How We Can Break Free<\/em>. Since then, by Walt McRee\u2019s estimate, around 50 affiliated groups have sprouted up in states, counties and cities from Arizona to New Jersey.<\/p>\n

\u201cI\u2019ve been working against the system all my life,\u201d says Susan Harman of Friends of the Public Bank of Oakland. \u201cI think public banking is the most radical thing I\u2019ve ever heard.\u201d Harman, a former teacher and a onetime aide to New York City Mayor John Lindsay, helped get the Oakland City Council to pass a resolution last November directing the city to determine the scope and cost of a feasibility study for a public bank\u2014a tiny yet promising first step.<\/p>\n

A feasibility study completed by Santa Fe, N.M., in January 2016 found that a public bank could have a $24 million economic impact on the city in its first seven years. A resolution introduced last October would create a task force to help the city prepare to petition the state for a charter. \u201cIt\u2019s the smallest municipality investigating public banking,\u201d says Elaine Sullivan of Banking on New Mexico, who hopes the task force could complete its business plan by the end of the year. \u201cWe\u2019re interrupting the status quo.\u201d<\/p>\n

In February 2016, the Philadelphia City Council unanimously voted to hold hearings discussing a public bank. Advocates are now working with the city treasurer to find funds to capitalize the bank.<\/p>\n

PBI has faced a rougher path in state legislatures. In Washington, state Sen. Bob Hasegawa (D) has introduced a public banking bill for eight straight years. Despite numerous co-sponsors, the bill can\u2019t get out of committee. Efforts in Arizona and Illinois have also gone nowhere. California Gov. Jerry Brown (D) vetoed a feasibility study bill in 2011, arguing the state banking committees could conduct the study; they never did.<\/p>\n

One overwhelming force opposes public banking: Wall Street, which warns that public banks put taxpayer dollars at risk. \u201cThe bankers have the public so frightened that [public banking] will destroy the economy,\u201d says David Spring of the Washington Public Bank Coalition. \u201cWhen I talk to legislators, some are opposed to it because \u2018it\u2019s for communists and socialists.’ Like there are a lot of socialists in North Dakota!\u201d<\/p>\n

In Vermont the financial industry fought a proposed study of public banking, says Gwen Hallsmith, an activist and former city employee of Montpelier. \u201cWe don\u2019t have branches of Bank of America or Wells Fargo in Vermont, but they have lobbyists here.\u201d So Hallsmith got the study done herself, through the Gund Institute at the University of Vermont. It found that a state bank would boost gross domestic product 0.64 percent and create 2,500 jobs.<\/p>\n

The state eventually passed a \u201c10 percent\u201d program, using 10 percent of its cash reserves to fund local loans, mostly for energy investments like weatherizing homes. Meanwhile, Hallsmith helped push individual towns to pass resolutions in favor of a state bank\u2014 around 20 have now done so. Hallsmith says her advocacy came at the expense of her job; the mayor of Montpelier, in whose office she worked, is a bank lobbyist. Hallsmith now coordinates a citizen\u2019s commission for a Bank of Vermont.<\/p>\n

Because of state resistance, PBI has encouraged its supporters to go local. And several issues have emerged to assist. For instance, environmental and indigenous activists have demanded that cities move money from the 17 banks that finance the Dakota Access Pipeline. But therein lies another dilemma: Who else can take the money? Community banks and credit unions lack the capacity to manage a city\u2019s entire funds, and larger banks are better equipped to deal with the legal hurdles involved in handling public money. So divesting from one Wall Street bank could just lead to investing in another.<\/p>\n

A public bank could solve this problem, either by accepting cities\u2019 deposits or by extending letters of credit to community banks to bolster their ability to take funds. Lawmakers in Seattle have floated a city- or state-owned bank as the best alternative for reinvestment, and Oakland council member Rebecca Kaplan has connected divestment and public banking as well.<\/p>\n

Another opportunity arises with marijuana legalization initiatives. Because cannabis remains illegal at the federal level, most private banks are wary of working with licensed pot shops, fearing legal repercussions. This means many of these shops subsist as all-cash businesses. \u201cIt\u2019s seriously dangerous; people arrive in armored cars to City Hall to pay taxes with huge bags of money,\u201d says Susan Harman. In Oakland and Santa Rosa, Calif., public banking advocates are partnering with cannabis sellers to offer public banks as an alternative, which would make the businesses safer while giving the banks another source of capital.<\/p>\n

While Donald Trump hasn\u2019t formally introduced a long-discussed infrastructure bill, his emphasis on fixing the nation\u2019s crippling public works has also bolstered the case for public banking. Ellen Brown maintains the country could save a trillion dollars on infrastructure costs through public-bank financing. That\u2019s preferable to Trump\u2019s idea of giving tax breaks to public-private partnerships that want big returns.<\/p>\n

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FROM THE GREAT PLAINS TO TRENTON<\/h3>\n

\u201cAll it\u2019ll take is the first domino to fall,\u201d says Shelley Browning, an activist from Santa Rosa. \u201cTowns and cities will turn in this direction because there\u2019s no other way to turn.\u201d And PBI members think they\u2019ve found an avatar in Phil Murphy, a Democrat and former Goldman Sachs executive leading the polls in New Jersey\u2019s gubernatorial primary this year.<\/p>\n

Murphy has made public banking a key part of his platform. \u201cThis money belongs to the people of New Jersey,\u201d he said in\u00a0an economic address<\/a>\u00a0last September. \u201cIt\u2019s time to bring that money home, so it can build our future, not somebody else\u2019s.\u201d<\/p>\n

Derek Roseman, a spokesman for Murphy, tells In These Times that Bank of America holds more than $1 billion in New Jersey deposits, but only made three small business loans in the entire state in 2015. Troubled state pensions could help capitalize a state-owned bank, and would earn more while paying lower fees.<\/p>\n

Murphy\u2019s primary opponent, John Wisniewski, chaired the Bernie Sanders campaign in the state, while Murphy raised money for Hillary Clinton. Some believe Murphy is simply using public banking to cover his Wall Street background\u2014and on many issues, Wisniewski\u2019s policy slate is more progressive. But Brown thinks Murphy\u2019s past primed him to recognize public banking\u2019s power: \u201cIt\u2019s always the bankers who get it.\u201d<\/p>\n

The first new state-owned bank in a century, chartered in the shadow of Wall Street, could shift the landscape. What\u2019s more, blue-state New Jersey and red-state North Dakota agreeing on the same solution would highlight public banking\u2019s biggest asset: transpartisan populist support. \u201cWe have Tea Partiers and Occupiers in the same room liking public banking. What does that tell you?\u201d asks PBI\u2019s Mike Krauss.<\/p>\n

\u201cRegardless of declared conservative or progressive affiliations,\u201d says state Sen. Hasegawa, \u201cregular folk \u2026 almost unanimously grasp the concept.\u201d He is working with Washington\u2019s Tea Partybacked treasurer, Duane Davidson, to advance public banking. \u201cI go to eastern Washington, \u2026 they get the whole issue about independence from Wall Street and corporate control.\u201d<\/p>\n

In fact, Krauss is himself a Republican. \u201cThe biggest thing going on in America, people decided we don\u2019t have any control anymore,\u201d he says. \u201cWhether it\u2019s Bernie\u2019s people or Trump\u2019s people, they\u2019re articulating the same thing but differently. \u2026 They want control of their money\u2014and it is their money.\u201d<\/p>\n

Originally published by In These Times<\/a><\/p>\n

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– See more at: http:\/\/www.occupy.com\/article\/bank-even-socialist-could-love?utm_source=Website+%27Join+Us%27&utm_campaign=28a60f94d6-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_77fe4a462d-28a60f94d6-73720709#sthash.xAGs9y9L.dpuf<\/p>\n","protected":false},"excerpt":{"rendered":"

\u201cMoney is a utility that belongs to all of us,\u201d says Walt McRee. McRee is a velvety-voiced former broadcaster now plotting an audacious challenge to the financial system. He\u2019s leading a monthly conference call as chair of the Public Banking Institute (PBI), an educational and advocacy force formed seven years… Continue reading → <\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/posts\/4769"}],"collection":[{"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/comments?post=4769"}],"version-history":[{"count":1,"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/posts\/4769\/revisions"}],"predecessor-version":[{"id":4770,"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/posts\/4769\/revisions\/4770"}],"wp:attachment":[{"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/media?parent=4769"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/categories?post=4769"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/tags?post=4769"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}