Category Archives: Local Economies

Banking on Colorado Response to
Calabria: Colorado would be wise to reject state-owned banking

Earl Staelin, board member of Be The Change — USA, and a leader in its initiative to establish public banks in Colorado, Banking On Colorado, wrote an Op-Ed for the Denver Post, entitled Colorado needs a public bank, which appeared in the print edition of the Denver Post on Sunday, February 15, 2015. In response to that Op-Ed, Mark A. Calabria, of the conservative think tank, the CATO Institute, wrote the following Op-Ed, appearing in the Thursday, March 5, 2015 print edition of the Denver Post — rebutting Mr. Staelins Op-Ed.

You will see as you read this piece that Mr. Calabria is either inaccurate in his statement of facts or he so cherry-picks them to support his opinion that this is not a credible rebuttal. We discuss here the problems with this Op-Ed paragraph-by-paragraph.

From the Denver Post (with our comments, clarifications, and corrections):


OPINION

Colorado would be wise to reject state-owned banking
With Commentary from Banking on Colorado

By Mark Calabria

POSTED:   03/04/2015 02:59:02 PM MST   |   UPDATED:   03/04/2015 03:43:15 PM

Borrowers and savers have lots to choose from, with the emphasis on choice. There's no good reason to force these institutions to compete with a state-owned "political" bank. (Timothy A. Clary, AFP/Getty Images)
Borrowers and savers have lots to choose from, with the emphasis on choice. There’s no good reason to force these institutions to compete with a state-owned “political” bank. (Timothy A. Clary, AFP/Getty Images)

Here, Calabria implies that all state-owned banks are “political”. In fact, there is some truth to this, but only in the sense that a state-owned bank, with proper oversight, supports the citizens of the state rather than the shareholders of a commercial bank.

The financial crisis and its associated rescues have left many of us, including myself, angry at our nation’s largest banks. The bailouts were unfair, with one set of rules for Wall Street and another set for Main Street. This understandable frustration has led some to believe the solution can be found in a state-owned bank. While we must search for a sustainable solution to the current flaws in our financial system, creating a state-run bank is a cure worse than the disease.

Like any good ideologue, Mr. Calabria, states his belief upfront — that “creating a state-run bank is a cure worse than the disease,” and goes on to either misstate facts, or so cherry-picks them that he cannot fail to support his belief.

Public banks have a long history, with the first known public bank established in Genoa, Italy in 1408. Its mission statement could have been taken from Occupy Wall Street, with one of its purposes “…to eradicate certain bad practices of bankers, who are so devoted to their own interest that they barely blush as they ruin the public good.” Like many public banks that followed, Genoa’s Banco di San Giorgio later failed in part due to its loans to government.

The first public bank was actually founded in Barcelona in 1401, the Taula de la Ciutat, to act as the treasury of the government of Catalonia. Others were established in Italy not long thereafter, including Genoa’s Banco di San Giorgio, established in 1408. Calabria provides no documentation or analysis for his conclusion that the bank failed in part due to its loans to government. This is a nice piece of history, but perhaps it’s best to focus, as he does, on banks that were established less than 200 years ago.

More recently the first American public bank was established in Vermont in 1806. It failed six years later, costing the citizens of Vermont the equivalent of almost $3 billion in today’s dollars. Seven other states established public banks in the 1800s, with the last of these, the Bank of the State of Alabama, failing in 1845. These banks were characterized by rampant corruption. As South Carolina legislator John Felder reflected in 1846, “Whenever … such cohabitation exists, the bank runs into politics and politicians run into the bank and foul disease and corruption ensue … .”

Looking at state banks formed in the early 19th century does have some relevance. However, these failures have only slightly more significance today than the Italian example given in the previous paragraph. Both the economic and political times were quite different. And the monetary system was very different when precious metal was involved. Further, democracies were young and inexperienced. States were still learning how to run democratic governments effectively. And many of the failures were due to faulty legislation that established the bank initially.

The Vermont State Bank proved successful, showing significant and increasing profits every year between 1807 and 1811 despite the many impediments thrown at Vermont by neighboring states and their private banks. In the words of Governor Galusha in 1809 in his message to the Vermont State House, “It will be remembered by many that I was not amongst those that favoured the institution of country banks; but it is apparent that the establishment of a public bank in this state has saved many of our citizens from great losses, and probably some from total ruin -– for it is obvious that but for this establishment, in lieu of our own Vermont bank bills, our citizens would on the late bankruptcies have been possessed of large sums of depreciated paper of the failing private banks …”

The private banks viciously attacked the Vermont State Bank and the community banks it supported through counterfeiting — not difficult at the time. The worthless counterfeit bills were difficult to detect. They were exchanged for the gold, depleting the gold reserves of the Vermont banks.

While the Bank of the State of South Carolina (BSSC) was not without political corruption, the bank operated successfully for 58 years, from 1812–1870. In the end, the BSSC did survive the American Civil War intact and in 1867 it still held a large amount of assets belonging to the State — some of which admittedly had questionable value.

But it was not corruption that closed the bank as implied by Calabria. Although the BSSC did have its detractors, it had many supporters. Speaking at the closing of the bank in 1870, a representative from the State Board of Agriculture remarked, “Thus passed away a powerful institution, which for more than half a century had exercised exclusive control of the financial affairs of the State. Its friends claimed that it had saved, consolidated, and made profitable the funds of the State, that it had furnished relief to many citizens and added to the general revenues of the State, improving and developing the towns of the interior. Its profits were employed in paying the interest and in reducing the principal of the public debt. It preserved its capital entire and its funds safe, maintaining the character and the credit of the State in Europe and at home without blot or suspense. Its most violent opponents admitted the ability and integrity displayed in its management, and declared that the abiding confidence of the people in it was a high but dangerous complement to the parity of the public characters of the State.”

The State Bank of Alabama was doomed to failure from its very start. The legislation that created it was ineptly crafted and this was taken advantage of by the board that ran the bank for their own profit. This is one of only two credible examples Calabria gives of how not to design state banking legislation. Clearly, we can learn from this example as well as the good example of North Dakota to understand how to design legislation that avoids excessive political influence and yet be an effective tool for the state. And a minor point: Alabama’s was neither the last state bank to be formed nor the last to fail in the first half of the 19th century.

The recent history of Fannie Mae and Freddie Mac, quasi-public banks at the federal level, illustrates that mismanagement and corruption are not exclusively a thing of the past. We can also look abroad. Germany has an extensive system of public banks, the most prominent being the Landesbanken, which like the proposal before us in Colorado, are owned by the state governments. Despite being a minority of Germany’s financial system, the bulk of losses related to the subprime crisis arose from these public banks. Years before the crisis, the IMF warned of risks hidden in Germany’s public banking system. Unfortunately those warnings were ignored.

And the operations of Fannie Mae and Freddie Mac is Calabria’s other good example of how excessive political influence can doom a public bank to failure. Although both Fannie and Freddie were privately owned, since 1968 and 1970 respectively, in the 1990s and early 2000s they were given mandates from Congress regarding what sorts of loans they should be supporting. Certainly, in part, this led to the collapse of both organizations. They were then put in government-managed conservatorship to restore transparency and accountability and many of their officials were removed from office.

However, rather than take this as an example of how all public banks are doomed to failure, it can be taken as a “lesson learned” on how not to operate a public bank. North Dakota had the foresight to a design a way of operating their bank to avoid most of the pitfalls that can cause it to fail.

In Germany, the largest set of public banks are the Sparkassen Banks, which comprise over 1,500 municipally-owned saving banks that fund a large portion of small and medium sized businesses in Germany. These banks suffered no bank closings after 2008. In fact, despite numerous attempts by the private banks to put the public banks in Germany out of business, most recently by passing legislation taking away their public insurance, like our FDIC, they continue to thrive and they help their local communities thrive as well and are an important reason why Germany has the strongest economy in the Eurozone today.

Some might point to the Bank of North Dakota, currently the only state-run and state-owned American bank. Currently the Bank of North Dakota is generally a well-run institution. It is also a massive subsidy to the fossil fuel industry. One need only look at its annual reports to see that much of its below-market lending has been to the fossil fuel industry. It’s a case in point; government-owned banks will tend to subsidize the powerful and connected. Most of its risk is ultimately shifted to the federal government via various guarantees.

If Mr. Calabria had done as he has suggested his readers do, and actually looked at the Bank of North Dakota’s annual reports, he might have noticed that loans to the oil and gas industry are not their main target. In fact, as of 31 December 2014, only $305,927,000 of the commercial loan portfolio was committed to oil country-related loans. The commercial loan portfolio as of that date was slightly more than $1.5 billion and the total loan portfolio is $3.8 billion (these numbers are from private communications with the Bank of North Dakota and will be finalized in their 2014 annual report to be released on April 2015). So let’s do the math — oil country-related loans comprise less than 8% of the Bank of North Dakota’s total loan portfolio. This is certainly dwarfed by the free market investment in North Dakota oil and gas.

Furthermore, most of the risk of these loans is absorbed by the State of North Dakota, which currently has a Double-A+ credit rating. Further, the Bank of North Dakota currently has a Double-A- Standard & Poor rating — among U.S. financial institutions, second only to the Federal Home Loan Banks, rated Double-A+.

The vast majority of funding for the Bank of North Dakota comes from deposits resulting from tax and fee collections. The bank essentially offers below market rate loans by paying lower deposit rates back to the State, ultimately costing the taxpayer. It’s not magic. It is simply a hidden subsidy. Rarely is such a lack of transparency in the interests of the general public.

It is very clear that Calabria has little understanding of fractional-reserve banking. Otherwise, he would understand that even if the Bank of North Dakota did make its loans at “below market rate”, that it can loan out up to nine times its equity. The return on equity for the Bank of North Dakota has averaged around 20% over the last decade. And rather than ‘costing the taxpayer’, it has returned over $300M back to the state of North Dakota during that time period.

Note that the Bank of North Dakota does make loans that Calabria would consider “below market rate” in certain areas that the government deems beneficial to the citizenry — like student loans, some of which are made at as low as 1% per annum.

These are not simply theoretical curiosities. Academic research actually tells us what happens when the government owns banks. The most comprehensive study1, from economists at Harvard University, finds “that higher government ownership of banks is associated with slower subsequent development of the financial system, lower economic growth, and, in particular, lower growth of productivity.” Keep in mind that productivity is ultimately what drives wage growth. This research has been extended in a recent paper2 that attributes much of the worse outcomes to political interference in bank lending decisions.

We will address, in a future post, why we believe the models in the academic research Calabria mentions are not applicable to some of the public bank structures that are clearly working. We give here several counter-examples to what he believes the papers conclude — the BRICs (Brazil, Russia, India, and China) in the following paragraph and the Bank of North Dakota and the Reconstruction Finance Corporation following the text of Calabria’s next paragraph. We include the two papers that support his position, in addition to several we quote, at the end of this post for those who would like to look in detail at these studies.

In the international scene, the BRICs, heavily into public banks, have clearly outpaced the western world, with their private banking system. The BRICs growth rate was 6.5 percent per annum in the previous decade whereas the industrial world had a growth rate of 1.5 percent during the same period. While this certainly cannot be attributed completely to the fact that they have an extensive public banking system, it would be hard to argue that the banking system has hurt their economies.3

When the government owns the banks, lending decisions become increasingly driven by politics, rather than economics. Resources flow to those with influence. Government-owned banks also tend to under-price risk in order to buy votes. If there is one lesson we should take away from the recent crisis, it is that when you intentionally under-price risk, bad things happen.

North Dakota has come up with a successful model for a state-owned bank. Only general policy and oversight is done by the legislature. A three-member State Industrial Commission oversees Bank of North Dakota, composed of the Governor, the Attorney General, and the Commissioner of Agriculture. The Bank has a seven-member Advisory Board appointed by the governor. The members must be knowledgeable in banking and finance. The Advisory Board reviews the Bank’s operations and makes recommendations to the Industrial Commission relating to the Bank’s management, services, policies and procedures. This is a system that has worked for almost a century. It is certainly a model that can be adapted to Colorado.

Another public bank that deserves attention because of its great success is the Reconstruction Finance Corporation, which operated as an agency of the U.S.government transparently and without scandal or fraud from 1933 to 1957. It was the largest bank in the world and the largest corporation in America at the time, providing financial support to state and local governments and making loans to banks, railroads, mortgage associations, and other businesses. It played a major role in pulling the U.S. out of the Great Depression, helping banks return to normal operations, and in funding World War II. It loaned $35 billion into the economy in the years 1933 to 1945. Congress having deemed it was no longer needed, reduced its size after World War II and eventually closed it in 1957. The Reconstruction Finance Corporation operated with great success and benefit to the country.

In contrast, the behavior of the big Wall Street banks has been a model of mismanagement and fraud in service of their own interest — against the interests of their own customers and the public. Their power over the political system is so great that they have become too big to regulate, too big to prosecute, and too big to fail. The American citizens have borne all their losses — through loss of wealth, jobs, income, and pensions.

Anger at Wall Street is well founded. But you have plenty of options besides Wall Street. Colorado has 96 independent community banks and 91 credit unions. That’s not to mention growing alternative sources like peer-to-peer lending and crowdfunding. Borrowers and savers have lots to choose from, with the emphasis on choice. There’s no good reason to force these institutions to compete with a state-owned “political” bank.

In Colorado, the community banks and credit unions are currently unable to meet the needs of small and medium-sized businesses. And the Wall Street banks are unwilling to do so. Further, as in the North Dakota model, a state-owned bank would not compete, but partners with, community banks and credit unions to make loans to deserving businesses. In fact, as a result of the support of the Bank of North Dakota, there are more community banks in North Dakota than in any other state in the U.S — according to the FDIC, 81% of banks in North Dakota are community banks. During the last decade, banks in North Dakota, in partnership with the Bank of North Dakota, have averaged over four times more small business lending than the national average.


Mark A. Calabria, a former senior aide to the Senate Committee on Banking, Housing and Urban Development, is the director of financial regulation studies at the Cato Institute.


References

1 The most comprehensive study

2 A recent paper

3 Mutually assured existence | The Economist


Public Banking In the News: How Public Banking is Winning the West

Public banking efforts are very active in the Western United States. Matt Stannard, who writes frequently about progressive economic issues, writes here about four of the more active public banking efforts in the western states: in Washington, New Mexico, Arizona, and Colorado.

From the Occupy.com:


Photo: liewcf / Flickr
Photo: liewcf / Flickr
How Public Banking is Winning the West
 

BY MATT STANNARD

FEBRUARY 17, 2015

You’ll read a lot about activism in this story, but most of it won’t sound terribly sexy or radical. There will be no black masks, no broken barricades or cops bashing skulls. Instead, what you’ll read about is hard work, lots of research about banks and economics and feasibility studies and cost-benefit analysis. There will be meetings, more meetings, and then more meetings. With people in suits even.

This is what the economic justice movement looks like on the inside. A new economy requires financing, and that financing needs to be managed democratically. Public banks are the way we do that.

Public banks are run by local or state governments, without shareholders, with a mandate to support local community banks and fund public goods like schools, city services and small businesses. Wall Street hates public banks because they demonstrate that local governments and communities can manage their money and finance their services without making massive interest payments to big banks.

Currently, there’s only one public bank in the United States, in North Dakota, but there are movements in over 20 states to create more. This story is about movements in four Western states where, because of persistent organizing, meetings, conversations, and a belief that democracy must be materialized, people like you and me have made impressive strides in the campaign to bring public banks to the United States.

Washington: “A Great Step Towards Democratic Control”

The state of Washington has been home to a public banking movement for a while now, with members of the Washington Public Bank Coalition finding a longtime ally in State Sen. Bob Hasegawa. The empowerment in Seattle of one of the country’s most progressive city councils may be decisive in tipping the scales for the public banking movement. The Seattle City Council’s adoption last year of a strong and uncompromising minimum wage ordinance – combined with a city budget that is revolutionary in its scope of social investment and commitment to economic empowerment and community revitalization – makes a publicly-owned financial institution especially appropriate for the city. A series of meetings on public banking took place in Seattle in December, featuring the state coalition, the Public Banking Institute, and several organizations from Seattle and throughout Washington.

I asked City Council member Kshama Sawant about the role of a public bank in financing the City’s vision of economic democracy. “Public banking is a great step towards the kind of democratic control over the economy that is urgently needed for investments in renewable energy, affordable housing and public transportation,” she told me. Fellow Council member Nick Lacata agrees; he recently told the Puget Sound Business Journal, “I think what really resonates with people is that these are public funds. Why are we putting them in private banks that don’t necessarily have the public interest in mind? Why don’t we capture them and put them in public banks that have the public interest in mind?”

Much work remains to be done in Washington where, as in many states, Lacata points out, questions exist concerning the constitutionality of public banks. (The Washington Coalition has concluded that public banks would not violate the state constitution). Sawant and other City officials find Washington citizens’ efforts inspiring in the face of the damage done to America by too-big-to-fail banks. “Wall Street and the big banks looted the economy and destroyed the dreams of millions of working people,” Sawant says. “And not only have these banks not been held accountable, they have successfully clawed back the few meager reforms meant to prevent another crisis like the Great Recession.”

New Mexico: “Dignity, Respect and Control Over their Own Lives”

Santa Fe was hit hard by the 2008 financial meltdown. Chiefly funded by tourism and money from the state, Santa Fe finds both of those sources depleted. Since 2011, the group We Are People Here has been fighting to bring economic democracy to the city. The group’s primary initiative has been the creation of a public bank. Last year, the City of Santa Fe answered the group’s call and agreed to listen to what they had to say. Following a symposium hosted by Mayor Javier Gonzales in September, the city began to seriously consider opening its own bank. Then, on Jan. 28, the Santa Fe City Council approved a feasibility study for such a bank.

It’s “the first official step” in the process, according to Nichoe Lichen of We Are People Here. “It will answer some important questions and compare several models for how a bank might serve Santa Fe.”

But Lichen hopes the city won’t limit itself “to evaluating Santa Fe’s current financial circumstances.” Rather, people should ask about “the risk of loss to public funds with Santa Fe’s current financial arrangements” with no public bank. That’s a fair question, since too-big-to-fail Wall Street banks can now “bail in” and gobble up depositors’ funds if they go under due to losses in shady, speculative deals.

Economic justice advocates in Santa Fe are excited. “Our mayor has taken the lead,” Lichen says. “We are so proud of him. The vast majority of individuals and organizations we have reached out to over the last two years have said this is a no-brainer.” Lichen says community bankers are somewhat uneasy about a public bank, believing it would compete unfairly with local banks, which are encumbered by operational costs and regulations. But a public bank would partner with, rather than compete with, community banks, allowing those banks to expand their portfolios without begging for support from Wall Street. Lichen also fears that officials in Santa Fe will settle for something less: a revolving loan fund that “would not keep our public funds safe from a bail-out or bail-in. It would not help end our debt cycle.”

“We are doing this to provide a more democratic, just, sustainable economy for Santa Fe,” Lichen says, “with dignity, respect and control by the people over their own lives.”

Arizona: “Liberation from Crushing Debt”

Over the past year, Arizonans for a New Economy co-directors Jim Hannley and Pamela Powers-Hannley have met with public officials, made presentations throughout Southern Arizona, and maintained one of the more impressive web sites in the new economy movement. “We are working at the State and local political levels to create a public bank for the City of Tuscon and/or the State of Arizona,” Jim Hannley told me in an email. The group recently met with State Sen. David C. Farnsworth, a Republican, and has been working closely with Sen. Steve Farley, a Democrat who has enthusiastically endorsed the idea. The group has also been engaging with Tuscon City Council members. Jim Hanley reports that Tuscon Mayor Jonathan Rothchild has promised to discuss public banking with Santa Fe Mayor Javier Gonzales.

The effort involves a stream of meetings and presentations with local sustainability and economic interest groups. But that patience and persistence is necessary, because public officials are risk-averse. Historically, when communities have been close to getting a public bank, the Wall Street bankers have parachuted in, filling public officials’ heads with misinformation about the supposed deleterious effects of such a bank (last year’s experience in Vermont is instructive in this regard). Elected leaders, fearing controversy, might conclude it’s not worth the effort.

“The challenge we face is primarily from elected officials who fear public backlash when an ill-informed constituency hears about the founding of a State or City bank,” Jim Hanley told me, and “addressing these challenges means developing partners in community organizations to provide a new distribution channel for our message.” This includes meeting with community bankers, who have more interests in common with their local businesses than they do with Wall Street bankers. The work is worth the effort for the Hanleys and Arizonans for a New Economy. “We are political activists who understand class conflict,” Jim said, “and the role that the banking monopoly plays in ensuring that the 1% continues to dominate all aspects of our country.” The democratization of finance, he said, “can liberate [people] from needless, rapacious, crushing debt.”

Colorado: “Fix this Badly Broken System”

Coloradans have been pushing for public banking since at least 2011, when a group calling itself the Main Street Partnership Bank coalition, made up of state legislators, public and non-profit lending agencies, and economic justice groups, began researching and debating the formation of state- or city-owned banks. On Jan. 31 of this year, a Denver conference entitled “Banking on Colorado” featured leading national figures such as Ellen Brown, Nomi Prins of Demos, and Mike Krauss and Gwen Hallsmith of the Public Banking Institute. Scores of local leaders were among the 120 or so people attending the event, which was sponsored by Be the Change-USA and moderated by Denver City Auditor Dennis Gallagher and Colorado National Bank’s Mike O’Neill.

Earl Staelin, a member of the board of directors for Be the Change-USA, has co-sponsored several citizen initiatives in Colorado to amend the state constitution to establish a public bank. He told me that the Bank of North Dakota was the model for Colorado – a bank that “makes loans in partnership with community banks such as in North Dakota,” and that would “lend for infrastructure, home ownership, student loans at low or no interest, clean energy,” and other public goods. The bank would be prohibited from “speculative investments such as mortgage-backed securities and derivatives.” Now, citizens in Denver, Boulder, Westminster, Englewood and other cities have joined the struggle.

The next steps are formidable. 86,000 signatures are needed to get public banking on a referendum ballot; Staelin’s group wants to collect 115,000 to provide a sufficient cushion for the inevitable challenges to signatures that will follow. Getting those signatures will take resources – petitioner circulators need to be paid, and Staelin guesses “it would likely take several million dollars” to sustain an informational campaign to beat back the propaganda from the big banks, particularly “the two large banking associations in Colorado, the Colorado Bankers’ Association and Independent Bankers of Colorado.”

But the multi-year effort is worth it to Staelin and his colleagues. “Public ownership and control of banks in the public interest,” he told me, “is the most realistic and effective way I know of to fix this badly broken system and to enable the vast majority of our population to thrive in a robust and stable economy, a clean and healthy environment where we have a meaningful opportunity to participate in our democracy.”

Matt Stannard is Policy Director for Commonomics USA and does research for the Public Banking Institute.

This article originally appeared at Occupy.com.


Bill Introduced in Maine Legislature to Establish a State Public Bank

A bill to establish The Maine Street Bank was introduced in the Maine legislature on 13 January 2015. Titled An Act to Create a Public Bank, the bill proposes to create a public bank by 1 July 2017 for the state of Maine that is largely modeled after the nearly century old Bank of North Dakota. It would also authorize the formation of public banks in municipalities and cities around the state.

To summarize the bill as it currently stands:

The purpose of the bank would be

  1. Economic development. To support job creation and economic development in Maine by increasing access to capital for businesses and farms within Maine in partnership with local financial institutions;
  2. Financial stability. To provide stability to Maine’s financial sector, but not to compete with state-chartered financial institutions, credit unions or other financial institutions within Maine;
  3. Basic banking services. To reduce costs paid by the State of Maine for basic banking services; and
  4. Return profits. To return profits, beyond the revenue needed to accomplish the purposes and for continued sound operation of the bank


The operation, management, and control of the bank would be by a Board of Directors consisting of five voting members appointed by the Governor and subject to approval and confirmation by the State Legislature. The Treasurer of Maine and the Commissioner of Administrative and Financial Services would serve as ex officio non-voting members of the Board. The voting members of the board would serve without compensation.

The Board would appoint and determine the compensation of the President of the Bank, who should have extensive banking experience, and other subordinates they deem necessary for the operation of the bank.

The Board would also appoint a seven-member Advisory Committee who must be representatives of the Maine’s financial, business, agricultural and labor sectors and at least two must by officers of financial institutions chartered in Maine and who do not maintain offices outside the state.

The proposed powers of the bank are given in detail in the legislation, found at the link — An Act to Create a Public Bank.

Hearings were held in the Joint Committee on Insurance and Financial Services on 3 February 2015. The written testimony of six individuals, representing themselves or a private or governmental organizations, can be found through the links below. It is no surprise that of these the only written testimony in support of the bill was from its sponsor and one private citizen. The individuals and organizations representing the establishment all submitted testimony in opposition to the bill.

In support of the bill were


In opposition to the bill were

  • Carlos Mello – Director of Business and Finance of the State of Maine
  • Terry Hayes – Treasurer of the State of Maine
  • John Witherspoon – President and CEO, Skowhegan Savings Bank – Representing the Maine Bankers Association
  • Doug Ray – Director of Legislative Affairs and Communications, Maine Department of Economic and Community Development


The Senate committee should be voting on the bill today, 5 February 2015. We will post further information as it becomes available.

We should be prepared in Colorado to see the same sort of opposition to the formation of either a state bank or municipal banks. We can learn from the testimony in other states and municipalities that have proposed legislation.

Please read and these testimonies and comment on how to rebut the opposition arguments and to improve the supporting arguments in the form below. If you don’t support the idea of establishing public banks, we would like to hear from you today. Your ideas are important to us.

We will update this post as the bill progresses through the Maine Legislature. You can find details of the bill’s progress at the link, HP23

NYTimes OpEds: Room for Debate – Should States Operate Public Banks?

While many of us understand the importance and benefit of public banks for stimulating local economies, there are many who have the opposite point-of-view and can present arguments that are reasonable, given their set of assumptions. It is important that we understand these arguments and can respond to them. The link below is to a recent New York Times Opinion Page Forum entitled Room For Debate, in which arguments are given by both supporters and opponents of public banking.

Room for Debate – Should States Operate Public Banks?

PDFs of references cited in Mark Calabria’s piece can be found Government Ownership of Banks and Why Do Government Banks Perform Worse? — A Political Interference View.


Observations of Ellen Brown on WSJ Article about the Bank of North Dakota

In an article in The Wall Street Journal dated November 16, 2014 and entitled Shale Boom Helps North Dakota Bank Earn Returns Goldman Would Envy, Chester Dawson relates a largely factually correct representation of the Bank of North Dakota. However, the interpretation of these facts is easily questioned. Ellen Brown, a major intellectual leader of the Public Banking movement, critiques the article in her blog, ellenbrown.com and reprinted below. This blog entry is also a very accessible summary of the benefits of a public bank.

If you are a subscriber to wsj.com, the original Wall Street Journal article, including comments, can be accessed here. Those who don’t have this access can view a reprint of the article here.

From the The Web of Debt Blog:


WSJ Reports: Bank of North Dakota Outperforms Wall Street

Posted on   November 19, 2014   by   Ellen Brown   at   ellenbrown.com

While 49 state treasuries were submerged in red ink after the 2008 financial crash, one state’s bank outperformed all others and actually launched an economy-shifting new industry. So reports the Wall Street Journal this week, discussing the Bank of North Dakota (BND) and its striking success in the midst of a national financial collapse led by the major banks. Chester Dawson begins his November 16th article:

Continue reading Observations of Ellen Brown on WSJ Article about the Bank of North Dakota

Public Banking in the Press — NYTimes Blog, You’re The Boss: What North Dakota’s Public Bank Does for Small Businesses

One of the major roles of the Bank of North Dakota (BND) is to support small businesses within the state. This story, which was in the New York Times Blog, You’re the Boss — The Art of Running a Small Business on March 13, 2014, gives some detail about how BND can help a small business through its partnership loan program. It further gives some details of the operations of the BND. We reprint the article here. The original article can be found at http://boss.blogs.nytimes.com/2014/03/13/what-north-dakotas-public-bank-does-for-small-businesses/

From NYTimes.com:


What North Dakota’s Public Bank Does for Small Businesses

By ROBB MANDELBAUM        MARCH 13, 2014 7:00 AM

Five years ago, Brian Brasch, president of Branick Industries, a maker of specialty automotive tools in Fargo, N.D., took a phone call from a stranger. The caller was an auto mechanic in Florida who had an idea for a new kind of drain plug for an oil pan, one with an O-ring that expands to stop oil leaks.

Continue reading Public Banking in the Press — NYTimes Blog, You’re The Boss: What North Dakota’s Public Bank Does for Small Businesses

Public Banking in the Press: Public bank advocates gain advice from experts – A Report from the Banking On New Mexico Symposium

The following article, from the Santa Fe New Mexican, is a report from the Banking on New Mexico Symposium: Funding Local, Sustainable Economies held in Santa Fe on September 27, 2014. The format of Banking on Colorado: Bringing Our Money Home Conference, to be convened on January 31, 2015 is very similar to the Santa Fe symposium, with some of the same nationally know speakers.

From The Santa Fe New Mexican:


Public bank advocates gain advice from experts

Posted: Saturday, September 27, 2014 10:00 pm | Updated: 11:18 pm, Sat Sep 27, 2014.


By Ed Moreno
For The New Mexican

The path to establish a publicly owned bank will be scattered with legal and political obstacles, but scores of citizens, public officials and public finance experts gathered in Santa Fe on Saturday to make the case that it can, and should, be done.

The spirited gathering, organized by “We Are People Here,” brought local, national and international perspectives on why it is necessary to try to establish publicly owned and operated banks that serve local communities, and not the “plutocracy” that controls the nation’s wealth, the event’s organizer said.

“We are gathered here because we recognize to the degree greater than in any time in the last 40 years that we are on our own,” said Craig Barnes, the founder of the organization. He cited the concentration of wealth and power and said “the life’s blood is being sucked away from our local communities.”

“We’re not here to blame, we’re not here to complain. We’re here to get up off our knees, because it’s in our nature as Americans to be on our feet,” he said.

Continue reading Public Banking in the Press: Public bank advocates gain advice from experts – A Report from the Banking On New Mexico Symposium

The Bank of North Dakota — Its History and Operation

North Dakota has a public bank–a bank that has been owned and operated by the people of North Dakota since 1919. Because of the Bank of North Dakota, the state weathered the crisis of 2008 far better than most. North Dakota has not had a single local bank failure in more than 20 years. This documentary, produced by Prairie Public Broadcasting, presents the bank’s history, its current operation, and how it benefits the state.