Oregon House Bill 2972 Authorizes A State Bank

Ellen Brown writes today that “…the budget crises now being suffered by nearly all the states did not arise from too much spending or too little taxation. They arose from a credit freeze on Wall Street. In the wake of the 2009 financial market collapse, banks curtailed their lending more sharply than in any year since 1942, driving massive unemployment and causing local tax revenues to plummet.”

How then can we restore credit in the state?  The FED is not authorized to do it, plus that would only increase our national debt.  Brown says, “One measure that is drawing increasing interest is the creation of a bank modeled on the Bank of North Dakota (BND), currently the only state-owned bank in the country. The BND has a 92-year history of safe, secure and highly profitable banking. North Dakota has the lowest unemployment rate in the country; and in 2009, when other states were floundering, it had the largest budget surplus it had ever had.

Eight states now have bills pending either to form state-owned banks or to do feasibility studies to determine their potential. This year, bills were introduced in the Oregon State legislature on January 11; in Washington State on January 13; in Massachusetts on January 20 (following a 2010 bill that lapsed); and in the Maryland legislature on February 4. They join Illinois, Virginia, Hawaii, and Louisiana, which introduced similar bills in 2010. The Center for State Innovation, based in Madison, Wisconsin, was commissioned to do detailed analyses for Washington and Oregon. Their conclusion was that state-owned banks in those states would have a substantial positive impact on employment, new lending, and state and local government revenue.

Oregon Rep. Bob Jenson has introduced House Bill 2972.

Banks “create” money by leveraging their capital into loans. At an 8% capital requirement, they can leverage capital by a factor of twelve, so long as they can attract sufficient deposits (collected or borrowed) to clear the outgoing checks. States give this leveraging power away when they put their deposits in Wall Street banks and invest their capital there.

State and municipal governments have assets tucked all over the state in separate rainy day funds, which are largely invested in Wall Street banks for a very modest return. At the same time, states are borrowing from Wall Street at much higher interest rates and have to worry about such things as credit ratings, late fees, and interest rate swaps, which have proven to be very good investments for Wall Street and very bad investments for local governments.

By consolidating their assets into their own state-owned banks, state and local governments can leverage their own funds to finance their own operations; and they can do this essentially interest-free, since they will own the bank and will get the interest back. The BND contributed over $300 million to state coffers in the past decade, a notable achievement for a state with a population that is less than one-tenth the size of Los Angeles County.

Imagine that!  We send our money to Wall Street and receive modest returns.  You know what money in a CD fetches these days!   Then Wall Street turns around and loans that money back to us at outrageous interest rates. or worse, turns down needy small business starving for funds.

A State Bank has been run successfully in North Dakota for 92 years.  Let’s move ahead and open a State Bank of Oregon and pay ourselves first.

Here’s Barbara Dudley speaking about the Oregon economy and the need for a State Bank:

Thanks to Conscious Media Network for highlighting this story.

3 Responses to “Oregon House Bill 2972 Authorizes A State Bank”

  1. I would ask you to re-think your position on this. It’s not the first time such an effort has been made. I think Grattan Kerans was speaker the last time this came up.

    Remember WaMu? I felt badly for equity holders, but they bought those equities because of the types of lending activities that were being taken by WaMu. Remember Shore Bank? Little restructuring going on there…but, they invested in the right types of projects.

    How would you remove politics, especially social justice politics, from the day-to-day operations of a State Bank? And who would be the equity holders?

    But, this is simply my opinion or fear, and not worth bother.
    .

  2. Oregon Guy, I have given it a lot of thought and I’m anti-statist to boot. You’ve asked great questions and I’ll seek to answer your questions. Keep in mind that Jepson is from a conservative district and it’s worked for a long time in N. Dakota.

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