Should the City of Santa Fe establish a public bank? The State of New Mexico? Maybe a Bank of Gaza?
Not a very sexy topic, but I’m convinced it’s a red hot, super-charged, high-explosive subject that deserves a lot more attention here in New Mexico and around the rest of the country. Maybe even Gaza.
Approximately 300-350 people attended the Banking on New Mexico Symposium sponsored by the Public Banking Institute and We Are People Here! in Santa Fe (Sept. 27, 2014) but there should have been two or three times that many. The event’s livestream is archived here and here.
In a nutshell, a public bank is controlled by a state or the public under state control. It reinvests the public’s money in the community to meet public goals, rather than sending our money to Dubai in search of the greatest return for the shareholders. Think Main Street, not Wall Street. A public bank shifts the control of our wealth from the few to the many, challenging the concentration of power, and reinvigorates our democracy. (A good description is here.)
“I care not what puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man that controls Britain’s money supply controls the British Empire, and I control the British money supply.” Baron Nathan Mayer de Rothschild, 1840-1915
I first heard about North Dakota’s State Bank (the only one in the country) in my New Economy Book Club a few years ago. All of the assets of the state of North Dakota are assets of its state bank which reinvests those assets back into the state. Is it a mere coincidence that North Dakota has the lowest unemployment rate in the country? . . . the lowest foreclosure rate? . . . and the only state with a budget that has remained in the black since the financial crisis of 2008?
Interesting factoid – 40% of the world’s banks are publicly-owned, and most of them are in the BRIC countries (Brazil, Russia, India and China).
Ellen Brown, author of The Web of Debt and The Public Bank Solution, says there are two reasons to create a public bank. (1) Public deposits are at risk. The 2010 Dodd-Frank bill prevents future federal bail-outs. (2) The Federal Reserve just passed new rules that require banks to hold one month’s worth of high quality liquid assets. State & local bonds don’t qualify so banks will start dumping them and we may see more municipal bankruptcies. Read Ellen Brown’s blog here.
Since 2010, 20 states have introduced bills re. state banks but none have passed . . . yet. City of Santa Fe has issued an RFQ to conduct a feasibility study of creating a city bank which will hold city assets and reinvest in city projects to meet public goals.
Why is a public bank important? Mike Krauss says that “political power flows from wealth; wealth will seek to create more wealth with no thought of the public good.” A public bank breaks up this concentration of wealth and political power while encouraging stewardship for the public good.
Access to local capital is a big hurdle to opening new small businesses. 90% of all jobs come from small businesses. When people don’t have access to capital, predatory lending fills the gap with 700% … 1000% and higher interest rates, continuing the cycle of poverty. Check out the website of the Bank of North Dakota here and see what it’s doing for small businesses. Lending $25,000 with no collateral! Seriously!
Stephen Fischmann (former NM State Senator) is working to stop the exorbitant interest rates charged by payday loan companies. Santa Fe has just joined Dona Ana County, Las Cruces, Alamogordo, Mesilla, and The New Mexico Municipal League in passing a unanimous resolution asking the state to enact interest rate caps of 36% or less. Albuquerque City Councilors Diane Gibson and Ike Benton have a similar resolution which rumor has it will be on the October 6 agenda.
The Public Banking Institute is the place to go to learn more about setting up a state bank. Mike Krauss shares some key points:
- be clear about the mission of the public bank (community development finance institution; banking services for the Un/Underbanked; economic development partnership bank; student loan facilitator; internal infrastructure lending; lender of last resort for housing; or the North Dakota model)
- public banks drive down the costs of debt service
- public banks can be more aggressive in lending (for example, public banks in Germany lend 25% of their deposits to renewable energy projects and have taken nuclear projects out of the mix altogether)
- public banks can facilitate student loan consolidation and/or forgiveness. Two months ago, the Bank of North Dakota announced that all North Dakota students could bring any of their student loans to the bank and consolidate them into a single loan at 1.37% variable interest rate or 3.6% fixed. A public bank might offset student loans for students who go into public service.
Professor Richard D. Wolff has a “deep and abiding respect for the monster banks on Wall Street that shape our reality.” They have recovered but their exposure in this crisis has led many to ask some tough questions. These monster banks have admitted and paid large fines for (1) money-laundering, for (2) the LIBOR scandal (setting the world’s interest rates so banks could benefit), for (3) illegal fees and charges, and for (4) the mortgage fiasco created by the credit default swaps.
Wolff reminds us that banks are social institutions and make decisions about how to spend our money and we must live with their decisions. Private banks want to maximize profits. Public banks want to further public goals.
“Capitalism hit the fan in 2008. . . . Every bank in the U.S. was bankrupt” until the federal bail-out. This crisis resulted from actions of both political parties. Don’t forget that President Clinton signed the repeal of the Glass-Steagall Act.
I encourage you to watch these two short (12 minutes each) videos.
How does this all connect with Gaza? The conversations about a public bank and capitalism give me a few ideas:
- The American taxpayer is now fueling Israel’s occupation of Palestine and paying for much of the bloodshed in the Middle East. If capitalism collapses, or sinks into a serious recession/depression, maybe our unholy exploits in Israel, Palestine, Iraq, Syria and elsewhere will come to an end.
- Israel controls the money supply in Gaza, just as Rothschild controlled the money supply of the British Empire. Israel collects taxes from the Palestinians and then turns around and returns a portion of it to the Palestinians, if Israeli leaders are in the mood. Israel also keeps the people in Gaza a captive market for goods and services provided by Israel. Would a state bank (lets call it the Bank of Gaza) be able to break this deadly grip, at least a bit?
- Maybe Western countries should look at Islamic banking for examples of ethical investing and banking. See here.
- At a minimum, Palestinians need to explore opportunities presented in a New Economy where there is greater local control.
The Key to Sustainable Cities – Gwendolyn Hallsmith
Creating Wealth – Gwendolyn Hallsmith
Occupy the Economy – Richard D. Wolff
Democracy at Work – Richard D. Wolff
Capitalism Hits the Fan – Richard D. Wolff
Web of Debt – Ellen Brown
The Public Bank Solution – Ellen Brown
Rules of Thumb – Alan Webber
Life Reimagined – Alan Webber
Democracy at the Crossroads – Craig Barnes
In Search of the Lost Feminine – Craig Barnes
Capital – Thomas Piketty