CALIFORNIA LEGISLATURE PASSES BILL TO STUDY STATE-OWNED BANK

AB 750, California’s bill to study the feasibility of establishing a state-owned bank that would receive deposits of state funds, has passed both houses of the legislature and is now on the desk of Governor Jerry Brown awaiting his signature.

It could be the governor’s chance to restore the state to its former glory. As noted in Time Magazine:

[I]n the 1950s and ‘60s, California was a liberal showcase. Governors Earl Warren and Pat Brown responded to the population growth of the postwar boom with a massive program of public infrastructure—the nation’s finest public college system, the freeway system and the state aqueduct that carries water from the well-watered north to the parched south.

But that was before Proposition 13, a California constitutional amendment enacted by voter initiative in 1978. Prop 13 limited real property taxes to one percent of the full cash value of the property and required a two-thirds majority in both legislative houses for future increases of any state tax rates.

Prop 13 radically reduced the tax base, and it would be difficult to raise property taxes now. The tax savings simply drove property prices up, getting capitalized into additional debt service to the banks. Today, a rise in property taxes would lead to even more foreclosures and abandonments, reducing tax revenues even more.

Meanwhile, the state is struggling to meet its budget with a vastly shrunken tax base. What it needs is a new source of revenue, something that won’t squeeze consumers, homeowners, or local business.

A state-owned bank can provide that opportunity. North Dakota, the one state that currently has its own bank, is the only state to be in continuous budget surplus since the banking crisis began. North Dakota’s balance sheet is so strong that it recently reduced individual income taxes and property taxes by a combined $400 million and is debating further cuts. It also has the lowest unemployment rate, lowest foreclosure rate and lowest credit card default rate in the country, and it hasn’t had a bank failure in at least the last decade.

Revenues from the Bank of North Dakota (BND) have been a major boost to the state budget. The bank has contributed over $300 million in revenues over the last decade to state coffers, a substantial sum for a state with a population less than one-tenth the size of Los Angeles County. North Dakota is an oil state, but according to a study by the Center for State Innovation, from 2007 to 2009 the BND added nearly as much money to the state’s general fund as oil and gas tax revenues did. Over a 15-year period, according to other data, the BND has contributed more to the state budget than oil taxes have.         

North Dakota is a conservative red state, not the sort you would expect to be engaging in government enterprise. But the conservative justification for a state-owned bank is that it preserves state sovereignty, allowing the state to be independent of Wall Street and the Feds. The BND is not a business competitor of the local banks but partners with them, helping with capital and liquidity requirements. It participates in loans, provides guarantees, and acts as a sort of mini-Fed for the state.

According to the annual BND report for 2010:

Financially, 2010 was our strongest year ever. Profits increased by nearly $4 million to $61.9 million during our seventh consecutive year of record profits. . . . We ended the year with the highest capital level in our history at just over $325 million. The Bank returned a healthy 19 percent ROE, which represents the state’s return on its investment.

A 19 percent return on equity beats the 170 billion dollars LOST by CalPERS and CalSTRS, California’s two public pension funds, by the time the stock market hit bottom in March 2009. The BND was making record profits all through that period.

 The BND augments state revenues in other ways besides just returning its profits to the general fund. It helps build the tax base by providing the funding needed by local businesses, and by financing the infrastructure that attracts them. Among other resources, it has a loan program called Flex PACE that allows a local community to provide assistance to borrowers in areas of jobs retention, technology creation, retail, small business, and essential community services.

The BND also furnishes a credit line to the state itself, one that is effectively interest-free, since the state owns the bank. Credit lines are extended in times of emergency or whenever state departments or municipalities face unforeseen circumstances, such as the recent flooding in the state. Having a credit line to the state’s own bank allows state and local governments to avoid extortionate interest rates from Wall Street and pressure to privatize and reduce services in order to avoid downgrades from rating agencies. 

Timothy Canova is Professor of International Economic Law at Chapman University School of Law in Orange, California. In a June 2011 paper called “The Public Option: The Case for Parallel Public Banking Institutions,” he compared North Dakota’s comfortable financial situation to California’s:

. . . California is the largest state economy in the nation, yet without a state-owned bank, is unable to steer hundreds of billions of dollars in state revenues into productive investment within the state. Instead, California deposits its many billions in tax revenues in large private banks which often lend the funds out-of-state, invest them in speculative trading strategies (including derivative bets against the state’s own bonds), and do not remit any of their earnings back to the state treasury. Meanwhile, California suffers from constrained private credit conditions, high unemployment levels well above the national average, and the stagnation of state and local tax receipts.

California was once the nation’s leader in technology, industry, entertainment and public education. Under Governor Pat Brown, tuition at UC campuses was free, making higher education available to all. Today tuition is about $13,000 a year, and the state has an unemployment rate hovering at 12%. 

 California, like North Dakota, is resource-rich. A state-owned bank will allow it to capitalize on its resources to full advantage, by providing the credit needed to realize its potential.  As the bank was described by Assembly Member Ben Hueso of San Diego, who authored AB 750, “It’s not the fad of the moment, a pair of tight fitting jeans; it’s a pair of construction boots.”

You can contact Governor Brown’s office to urge him to sign AB 750 by writing or calling:

Governor Jerry Brown
c/o State Capitol, Suite 1173
Sacramento, CA 95814

Phone: (916) 445-2841 
Fax: (916) 558-3160

Email:  http://gov.ca.gov/m_contact.php

_________

First posted on YES! Magazine. Ellen Brown is an attorney, president of the Public Banking Institute, and the author of eleven books, including Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free. Her websites are http://WebofDebt.com and http://PublicBankingInstitute.org.

23 Responses

  1. “Studying the feasibility” means asking the globalist banking elite (Freemasons) for permission. And I can’t imagine why they would say yes.

  2. This site may just be my new best friend.

  3. sounds great! Go California!

  4. When local governments take control of their finances, they will take control of their destiny, and peace and posperity will prevail. The tyranny of debt, is the devil’s hand!

  5. Michael Hudson (whom I cited on this point) feels it is NOT too late to raise property taxes. He writes:

    I’m all FOR it — and for getting rid of Prop. 13.
    It’s true that this would push heavily mortgaged property into default.
    So? The financial sector has tried to make land-tax cuts irreversible by saying, “Tax land again, and you’ll cause defaults — and by the way, drive us bankrupt as well.”
    OK. So let there be defaults. The untaxing of land has simply let the land rent be capitalized into large bank loans — while forcing states and localities to tax labor and business with income taxes and sales taxes, thereby raising the cost of living and doing business.
    I don’t see anyway to re-set a good, classical tax system WITHOUT replacing the dysfunctional banking system. And with so much property in negative equity anyway, now is a good time to do it — and to repeal Prop. 13, above all the free lunch it gives to commercial property.
    My associate Mason Gaffney has written on this at length, and I’m fully in agreement with his analysis.

    • This sounds an awful lot like Henry George’s writings. And I’m in full agreement that taxes on land (and all other natural resources, along with all special privileges granted by government or community) should be taxed equal to the full market ground rent (or the equivalent for other resources and privileges).

      It would certainly level the playing field between rich and poor. And make this world a much better place.

      • My view is that money should be the SOLE source of taxation. If government collected all their revenue by taxing money directly, before or at the same time it was lent, those costs would be distributed out to the general population through the prices of goods and services when they are sold when the borrowers recouped those expenses by integrating it into the cost. This would be the case whether it was land, a commodity or a consumer good. The benefits would be numerous, for one laws could be put in place limiting spending by tying it directly to the total money lent, unless an emergency arose, and therefore it would be a direct percentage of GDP that would not change. The government would create an amount of money equal to the “tax” on money and spend it on expenditures and then the borrowers of money would earn back the created expenditure money by integrating the “tax” cost into their products which would suck up the government expenditures resulting in all the money being retired with the repayment of the loan. Since all commerce depends on money everything would contribute to paying a perfectly proportionate amount of taxes relative to the resources being used because taxes would no longer be an arbitrary decree enforces by government after the fact and instead it would be an intrinsic part of the money supply and therefore an intrinsic part of all commerce.
        This idea is based n the same premise that Ellen’s above post is talking about except it is a more fundamental aspect of it and therefore one step closer to the root of the problem, when Ellen’s premise is taken to its logical conclusion it ends with one result: Government directly taxing money. When government does not tax money the result is analogous to what Ellen said:

        “The untaxing of land has simply let the land rent be capitalized into large bank loans”

        Except I would say:

        “The untaxing of money has simply let the money rent be taken by large banks instead of being used to fund the country, a system which, if implemented, would immediately remove the necessity for creating any other arbitrary taxes while massively streamlining the entire taxation bureaucracy resulting in a much more efficient system”

        Instead of taxing a million goods and services in arbitrary and random ways that sometimes end up being harmful there needs to be one tax, on money. This would create a system much closer to the ideal of a free market because it would put everything on an equal footing since government taxation schemes would no longer be able to pick winners and losers solely by the way the taxation system is implemented.

        • I consider money to be a community resource. Its value is created by the community and those who hold it ought to pay for the privilege of holding that value. So I agree that we should tax money or charge a demmurage fee on it. But I also believe that the government should still collect the ground rent on land, the rent associated with the privilege of harvesting natural resources, and any rents from privileges granted by the community to private individuals and organizations.

  6. Talk about insanity, yet logical since the Neocon NWO Banksters logically are responsible for 911 and their greed is their guiding light. Gov. Brown does not sign the bill? The makings of a good reason for the field running for governor to be filled with state bank proponents and a major issue for the next election for California governor.

    Another bit of insanity came my way today. At least one US Constitutional smarty states that neither the US government nor the state governments have the right to coin money or make US currency. According to this person only foreign or private entities may create US currency used in the USA. This makes zero sense. I have read that either during the War of 1812 or possibly in the 1840s or so the US Constitution was re written. If so the right of the US government to create its own money had to have been the most important fraud in the re written US Constitution. The US government creating its own money would be the most important right of the US government. Great Britain and the Rothschilds would be the logicals bunch to disagree and behind this type of fraud.

    If push ever came to shove on this issue, the right of the US government to create its own currency, of course re writing the US Constitution would solve the problem. If Neocon NWO Banksters object. A good Plan B might be, now you see Great Britain, now you don’t.

  7. Here is the text of Jerry Brown’s veto of this bill:

    BILL NUMBER: AB 750
    VETOED DATE: 09/26/2011

    To the Members of the California State Assembly:

    I am returning Assembly Bill 750 without my signature.

    This bill would mandate yet another “blue ribbon” task force: in this
    case to examine whether California should establish a state bank.

    This is a matter well within the jurisdiction and competence of the
    Assembly and Senate Banking Committees.

    Rather than creating a new entity, let’s use the resources we have.

    Sincerely,

    Edmund G. Brown Jr.

    • Site for the text above:
      http://www.leginfo.ca.gov/pub/11-12/bill/asm/ab_0701-0750/ab_750_vt_20110926.html

  8. Ellen H. Brown and open letter to CA Congress, both houses:

    Note well what the governor said:

    “This is a matter well within the jurisdiction and competence of the
    Assembly and Senate Banking Committees.”

    He’s clearly pointing out that YOU, congress should not act like you’re doing something when you are not. Appointing a study committee is a classical way of bypassing your responsibility. You have plenty of evidence of the advisability and need for a state bank. You need only the GUTS and STRENGTH of Character to buck up against the strong banking LOBBY which will surely fight it.

    And it is especially important that you see that once the bill is passed and signed that the state will know it is mandated to deposit its tax funds in its own state bank! (BND was slow to get started because for many years they pacified local private banks by REdepositing taxes there with them (!) )

    William H. Quick ScD MIT
    151 Tremont St Boston, MA 02111
    bquick2002@ Yahoo.com
    617.670.0548
    562.631.9559

  9. SOLVING Economy problems would be very EASY, —-FIRST,—- install central banks run by the states and not by private cartels, and charging no interest when loans are for collective or social needs, like schools, electricity production, hospitals, roads, water, and sewage systems, community halls, social housing, etc…—- SECOND,—- apply the Tobin tax to control speculation and lobbeying (which are legalized fraud in a casino economy)—-THIRD,—- apply the social credit system as explained by the economist Clifford Hugh Douglas—-FOURTH—-Abolish fiscal paradises and apply a limit to profits and wages of the rulers (not more than 50% of the salary of their payroll employees, so that money will be reinvested in the real economy instead of going in a hedge fund (which is another fraud) ——BUT——Economy problems will never be solved as the present system IS a complete fraud run by wild capitalists without any moral or social values, banking lobbeying, war and speculation are for them a passion even if this means the death of millions of people (starvation and wars) like actually

    • I mean 50% over or more than, or 150% of their employee salary maximum

  10. These practices could be enforced if a real socialdemocracy could exist, not the actual artificial two party fantazy (trying to destroy each other) with candidates proposed to the population by campaign financing and propaganda from the lobbeys of multinational companies (oil pharma and armament producers) and banks——NO real democracy is possible without local citizens committees (municipal or other) proposing their candidates

    • Dylan Ratigan has started a petition to create a constitutional amendment to get money out of politics. Something along these lines is probably a prerequisite to any meaningful change in the political system.

  11. The real economy should be based on Production v/s consumption of goods and services and not on speculation and lobbeying at the stock market which did not exist on a large scale at the time of the economists J.M. Keynes, Marx (Carl not Groucho) or A. Smith

  12. The two main objectives of the elected should be FIRST make the country self-sufficient and SECOND redistribute the riches (so that the poorer can have access to basic neccessities like health care, food water lodging etc…) ——as the elected rarely do it—-the law of Sarkar on social cycles was always working, being, alternatively in power, —the Military, —the Intellectual—the Worker—and the Accumulator (like actually)

  13. I recently was forwarded an article by Ellen Brown by a Facebook friend. This is the best and fullest discussion of the financial morass we are in that I have read to date, with rational solutions as well.
    As a southern born Caucasian citizen in my sixties, I became an adult in the most racist social environment our country has known in modern times. It was truly appalling to me as a teenager and young adult, both for what I experienced in my ‘world’ and in myself. All that said, the current reality of states beginning to enact legislation aimed at balancing their own societal and financial experience is telling in one significant way. While it was incumbent upon the Federal government to find the means to end slavery in this country, Lincoln instead moved to create from the UNITED STATES of america a replacement system: the united states of AMERICA. The phrase ‘states rights’ became a dirty phrase when used by the racist Dixiecrat political structure in the southern states over a hundred years, but the framers of our Constitution intended that the states be both independent and united. From immigration legislation to state owned banks to whatever comes next and next maybe we can restore the system to its former design and not dissolve into something like the former Soviet Union.

  14. this is great. keep on blogging. http://www.franklindebtrelief.com/debt-consolidation-resources.html

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  17. […] CALIFORNIA LEGISLATURE PASSES BILL TO STUDY STATE-OWNED BANK […]

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