From Austerity to Abundance: Why I Am Running for California Treasurer

Governor Jerry Brown and his staff are exchanging high-fives over balancing California’s budget, but the people on whose backs it was balanced are not rejoicing. The state’s high-wire act has been called “the ultimate in austerity budgets.”

Welfare payments, health care for the poor, and benefits for the elderly and disabled have been slashed. State workers have been downsized. School districts in need of cash have been reduced to borrowing through “capital appreciation bonds” bearing 300% interest. In one notorious case, the Santa Ana school district actually borrowed at 1,000% interest. And the governor acknowledges that California still faces a “wall of debt” amounting to $28 billion. Some analysts put it much higher than that.

At the end of the 20th century, California was ranked the sixth largest economy in the world. By 2012, it had slipped to number twelve. It is coming back up, in part because European countries are falling further into recession; but California’s poverty rate remains the highest in the country. More than eight million Californians struggle to meet their daily needs, and one in four children lives in poverty. Income inequality is higher in the nation’s most populous state than in almost any other.

California cannot solve its budget problems by slashing services that have already been cut to the bone or raising sales taxes that hurt the poor far more than the rich. We are fighting over a pie that remains too small. The pie itself needs to be expanded – and it can be.

How? By reclaiming that portion that is now siphoned off in interest and bank fees.  When tallied up at every stage of production, interest has been calculated to claim one-third of everything we buy.

How can that money be recaptured?  By owning the bank.

The approach was pioneered in North Dakota, the only state to escape the 2008 banking crisis. North Dakota has the lowest unemployment rate in the country, the lowest foreclosure rate, the lowest default rate on credit card debt, and no state debt at all. It is also the only state to own its own bank.

In the fall of 2011, a bill for a feasibility study for a state-owned bank passed both houses of the California legislature. The Public Banking Institute, which I founded and chair, was instrumental in helping to get the bill as far as it got.  But it died when Jerry Brown vetoed it.  His rationale was that we already have a banking committee, and that the matter could be explored in-house. Needless to say, however, we have heard no more about it since.

I am therefore running for California State Treasurer on a state bank platform, along with Laura Wells, who is running for Controller. We are throwing our bonnets in the ring for the opportunity to show the Governor or his successor that a state-owned bank can be our ticket to returning California to the abundance it once enjoyed.

I was a recipient of that abundance myself. I got my undergraduate degree at UC Berkeley in the 1960s, when tuition was free; and my law degree at UCLA Law School in the 1970s, when tuition was $700 a year.  Today it is $13,000 and $45,000 annually, respectively, for in-state students.  In the 1960s, the governor of California was Jerry Brown’s father Pat Brown, a New Deal visionary who believed that investment in education, infrastructure and local business was an investment in the future.  Our goal is to revive that optimistic vision in 2014.

We are running on the endorsement of the Green Party – along with Luis Rodriguez for governor and David Curtis for secretary of state – because Green Party candidates take no corporate money. Candidates who take corporate money – and that means nearly all conventional candidates – are beholden to large corporate interests and cannot properly represent the interests of the disenfranchised 99%.

The North Dakota Model: Banking that Supports Rather Than Exploits the Local Economy

California’s revenues are currently parked in those very largest of corporations, Wall Street banks. These out-of-state banks use our giant asset pool for their own speculative purposes, and the funds are at risk of confiscation in the event of a “bail-in.”

In North Dakota, by contrast, all of the state’s revenues are deposited by law in the state-owned Bank of North Dakota (BND). The BND is set up as a DBA of the state (“North Dakota doing business as the Bank of North Dakota”), which means all of the state’s capital is technically the bank’s capital. The bank uses its copious capital and deposit pool to generate credit for local purposes.

The BND is a major money-maker for the state, returning a sizable dividend annually to the treasury. Every year since the 2008 banking crisis, it has reported a return on investment of between 17 percent and 26 percent. The BND also provides what is essentially interest-free credit for state projects, since the state owns the bank and gets the interest back. The BND partners with local banks rather than competing with them, strengthening their capital and deposit bases and allowing them to keep loans on their books rather than having to sell them off to investors. This practice allowed North Dakota to avoid the subprime crisis that destroyed the housing market in other states.

Consider the awesome potential for California, with its massive capital and deposit bases. California has over $200 billion stashed in a variety of funds identified in its 2012 Comprehensive Annual Financial Report (CAFR), including $58 billion managed by the Treasurer in a Pooled Money Investment Account currently earning a meager 0.264% annually. It also has over $400 billion in its pension funds (CalPERS and CalSTRS).

California’s population of 37 million is more than 50 times that of North Dakota. In 2010, the BND had about $4,500 in deposits and $4,200 in loans per capita.  Multiplying 37 million by $4,200, a State Bank of California could, in theory, generate $155.4 billion in credit for the state; and this credit would effectively be interest-free free, since the state would own the bank.

What could California do with $155 billion in interest-free credit? One possibility would be to refinance its ominous “wall of debt” at 0%. A debt that is interest-free can be rolled over indefinitely without cost to the taxpayers.

Another possibility would be to fund public projects interest-free. Eliminating interest has been shown to reduce the cost of public projects by 35% or more.

Take, for example, the San Francisco Bay Bridge earthquake retrofitting boondoggle, which was originally slated to cost about $6 billion. Interest and bank fees wound up adding another $6 billion to the overall cost to taxpayers. Funding through its own bank could have saved the state $6 billion or 50% on this project.

Then there is the state’s bullet train fiasco, which has been beset with delays, cost overruns, and funding issues. As with the Bay Bridge, costs are projected to double as a result of compounding interest on long-term bonds, imposing huge hidden costs on the next generation of taxpayers. By funding the bullet train through a state-owned bank, its costs, too, could be reduced by 50%.

The Challenge of a “Jungle Primary”

As voters become increasingly disillusioned with big-corporate-money candidates, the third party option is gaining traction. According to a recent Gallup poll, in 2013 42% of Americans identified themselves as political independents, significantly outpacing Democrats at 31% and Republicans at 25%.

The growing threat posed by independent and third-party candidates may explain why it is getting harder and harder to run as one. In California we now have Proposition 14, the Top Two primary, sometimes called the “Louisiana primary” or “jungle primary.” It might better be named the Incumbents’ Benevolent Protection Act.

Proposition 14 requires statewide and congressional California candidates, regardless of party preference, to participate in a nonpartisan blanket primary, with only the top two candidates advancing to the general election.  Incumbents and heavily-funded candidates have historically reaped the benefits of this arrangement. Third party candidates are liable to get knocked out in the first round in June, eliminating them from the November elections.

But the new system does have the advantage that anyone can vote for any candidate in the June primary; so if we can mobilize voters, we have a shot.

There is, however, another new hurdle imposed by Proposition 14. In place of the 150 signatures-in-lieu-of-filing-fee needed earlier, we now need 10,000 signatures – either that or $2,800. But we’re hoping to turn that requirement, too, to advantage, by using it to build the people power and energy necessary to take the June 3, 2014 primary.  If you would like to sign a petition or donate, click here.

There is another way to balance a state budget, one that leads to prosperity rather than austerity. California can stimulate its economy and the job market, restore low-cost higher education, build 21st-century infrastructure, preserve the environment, and relieve the state’s debt burden, by establishing a bank that is owned by the people and returns its profits to the people.

__________________

Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books including the bestselling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her 200+ credit blog articles are at EllenBrown.com. She is currently running for California State Treasurer on the Green Party ticket.

34 Responses

  1. […] Governor Jerry Brown and his staff are exchanging high-fives over balancing California’s budget, but the people on whose backs it was balanced are not rejoicing. The state’s high-wire act has been called “the ultimate in austerity budgets.” Welfare payments, health care for the poor, and benefits for the elderly and …read more […]

  2. You go girl…looking forward to giving you my vote.

  3. Wishing you all the best,if I lived out there I would work on your campain.It will be a hard mountain to climb but well worth the effort.
    All the best to you,Billy

  4. Do you have to be a registered voter in California to donate?

    • Nope, money is fungible! In fact someone offered to set up a bitcoin donation option. Thanks!

  5. A most excellent idea. We can all only wish Ms. Brown and her running mates electoral success. Crowd funding will be necessary, and while in don’t live in the state I will donate when that part is set up.

    • Thanks. Working on that!

  6. Thank you for your latest Web of Debt e-publications.
    I am British and live within the Isles, but find the insights within the W of D blogs highly relevant for re-imagineering British and European macro-financial situations. Receiving these blogs feels like manna bearing light cast on an opaque maelstrom of globalised mixed messages. This work and that of your associates brings transparency and hope for transitioning your society forward, and by example the world. These public banking proposals form
    the economic architecture for a new society – a vital creative contribution to the unfolding journey into the US and international economic reset.

    • Thanks! Re-imagineering, good word.

  7. I think it’s fantastic that you’re running Ellen . You’re part of the first wave!
    You inspire me and others…..

  8. Ellen, you have my vote, wholeheartdely. California is deteriorating under current “leadership”..I wonder what are your thoughts on the proposal to separate CA into 6 states?

  9. Sounds good Ellen, good luck. Governor Brown vetoing the Banking bill sounds like the Banking industry got to him and said “No way” can you allow this, and ,of course, he complied with their wishes.
    Political donations have corrupted “Freedom and Democracy” in America, and elsewhere, to the point that a citizens vote is now a waste of time and effort.

  10. Good luck, Ellen. Many thanks for all your efforts over the years.

  11. From a national econopolitical perspective a state bank per se and the many positive things that it can do for the state of California are but a band aid. The national malaise centered around New York’s Wall Street, Washington, D.C. and the so-called Federal Reserve System must be addressed for a definitive solution and end to the present civilizational secular and religious crisis.

    Ellen Brown, We wish you every success in your newest political venture/adventure. Hang tough!

    • Thanks. We think of it more as a steppingstone! Go local.

  12. Reblogged this on justaluckyfool and commented:

    “Justaluckyfool”
    “(T)he race is not to the swift,nor… wise, nor…to men of understanding, nor …to men of skill, but time and chance happeneth to them all.”
    ECCLESIASTES 9:11
    To California’s 37 million: Is it the time and opportunity for you to chose
    your path to “prosperity and the pursuit of happiness”?
    SHARE-TWEET this millions of times.
    Why would you not want prosperity for your selves and your children?
    SHOW AMERICA YOU CAN LEAD.
    NOW is the time ! HERE is the chance !
    From Austerity to Abundance: Why I Am Running for California Treasurer
    Posted on January 15, 2014 by Ellen Brown
    http://ellenbrown.com/2014/01/15/from-austerity-to-abundance-why-i-am-running-for-california-treasurer/

  13. […] Reblogged from WEB OF DEBT BLOG: […]

  14. Great news you are running for California State Treasurer. I have run for political office 18 times and never won but I think I’ve added to the system. You will have a massive forum to sell the state on a state bank. Very important. Remember that you influence your competition. They hear you when voters don’t. I didn’t fundraise so that can make things fun. Some people run for office and get bitter. The only way to run for office is to have a cause, which you definitely do. Hope you slam Interest Rate swaps every chance you get. I can say that I’ve raised cain against this country basically every day of my life since 1995. Don’t know that I’ve accomplished much but there is a massive amount of people raising cain now that were not doing so 15 years ago.

    • Thanks Randy, I’ll do my best to raise some cain!

  15. Awesome, Ellen! Thank you for clearly and powerfully communicating our economic central facts :)

  16. […] Ellen Brown Writer, Dandelion Salad The Web of Debt Blog January 15, […]

    • Ellen, if you could establish state bank, you will be serving two masters. One is the state of California and second, you will be blessing God who forbid it in all scriptures. Good luck.

      • God only forbids usury in the Christian Bible.
        A public bank serves the will of God by lending without interest, e.g., stealing.

  17. Hi Ellen,
    I just shared your article with ~2,000 Advanced Placement Economics teachers :)

  18. […] This piece first appeared at Web of Debt. […]

  19. […] Ellen Brown Web of Debt […]

  20. This is FABULOUS news! I would love to help! I’m in Arizona but surely I can do something online. On the phone. Where do we go for campaign information? Donations, etc.?

    • Am a native Californian and want to Help!!!!!graphics?

  21. Ellen,
    Are you aware of S-1282 of Sen. Elizabeth Warren and the exact matching bill in the House HR-3711? These are known as the 21rst Century Glass Steagall Act. Eight new co-sponsors signed on today on HR 3711 and Sen Elizabeth Warren has been scoring points, a la David vs the Wall Street Goliaths in just about every hearing of the sub-committees of the Senate Banking Committee!
    Where do you stand on Glass-Steagall??

  22. […] From Austerity to Abundance: Why I Am Running for California Treasurer […]

  23. Ellen,

    You are an inspiration…I see you in that lofty league with Elizabeth Warren! I’m trying to rally my son who lives in Santa Cruz, CA to get on board with your movement. I’m in AZ, where we’re PDP (pretty damned poor) and agitating for a state bank, but it’s a near-Sisyphean struggle!

    The best to you in this adventure!

  24. […] reformer Ellen Brown is running for California Treasurer — finally, someone I’d be happy to vote […]

  25. “Let them eat cake”, Marie Antoinette is alleged to have said as change was all about her and France. Seismic austerity affecting the majority in the US is not a good omen!

  26. Thank you for all the amazing work you are doing … excited that you are running for Treasurer!

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