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Push begins to create an Oregon State Bank

December 29, 2010

By Charles P. “Chuck” Jones, CFP

A bill (LC12O6) is going to be presented to the Oregon legislature early in 2011. The Oregon State Bank is the creation of the union-backed group, Oregon Working Families Party working in conjunction with Portland State University. Oregon Working Families leadership is led by Co-Chairs Jeff Anderson, Secretary-Treasurer UFCW local 555, and Barbara Dudley as Chair of the Portland chapter.

The State Bank will accept deposits of public funds to make, purchase, guarantee, or hold certain loans and to serve as custodian bank and directs the state treasurer to deposit monies in bank in amount treasury determines as necessary to allow bank to fulfill its duties. The bill directs excess income of the bank to go to the OR Rainy Day fund. The bank will be run by a board headed up by the governor, the treasurer, and the BOLI chairman. The group is promoting that it will be unbiased, since there will be an advisory board and have an independent structure . However, the advisory board is appointed by the main board, including the governor, treasurer, and BOLI chairman.

They have modeled their proposal on the Bank of North Dakota which was established in 1919, and it also has a board of governors comprised of the governor, treasurer, and in their case the agriculture commissioner. They feel that the Oregon State Bank could accomplish several things which would help the state’s economy, providing stability to local financial institutions, providing an alternative to bank consolidation, be an important partner to state-chartered banks, and through low costs allow for mission-driven economic development lending, facilitate effective economic development for the state, help the state budget (and would not be in competition with private banks), and would not have a retail presence.

All state funds will be deposited with the bank and the bank would be capitalized through bond issuance.

Although the goals of the bank may in fact stimulate the economy, primarily due to the fact that it does not have to operate at a profit and will pay no taxes if it does run at a profit, or for that matter, no property taxes or local taxes , is simply another government getting into the business of the private sector. Josh Harkinson reporting in “Mother Jones” states the bank of North Dakota is the only state bank in America – what Republicans might call an” idiosyncratic ” bastion of socialism. I couldn’t agree more.

Does government and banking work?  Can you spell Freddie Mac, or Fannie May?

Charles P. “Chuck” Jones, CFP

  
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Discuss this article

Bob Clark December 29, 2010

How stupid. This would eventually become another institution Oregon taxpayers would have to bail out, instead of the FDIC doing it for us. On top of this, no doubt it would hire a slug of new public employees. We need to be cutting state employment rolls not adding to them.

Here’s an idea. The flunkees at Portland State University can pool any money in their own pockets and run their own bank, leaving the rest of us out of it.

Bill Gallagher December 29, 2010

Not to be snarky, but here’s how you spell Fannie Mae

Barbara Dudley December 29, 2010

Chuck has done a fair job of describing the proposed state bank despite his disagreement with it. I only want to correct one thing: neither the proposal for a state bank, nor the Working Families Party, have anything to do with Portland State University. I do teach parttime at PSU, but there the connection ends. My political activities are my own, on my own time, and should not be attributed in any way to the University.

Maliengus January 27, 2011

I can spell North Dakota. Can you?

Push begins to create an Oregon State Bank « Public Banking January 29, 2011

[…] Read entire article here. […]

phil sheridan January 29, 2011

Your point Fannie Mae and Freddie Mac were government agencies getting into banking and failing miserably therefore public banking cannot work. I assume that’s your point.

In fact, Fannie Mae and Freddie Mac started out as public government agencies and then in the “Reagan revolution” [1980s] they were both privatized.

After the “Futures Modernization act” and the repeal of Glass Steagal act in the 90s Fannie and Freddie got involved in derivatives, mortgage backed securities, and off balance sheet special purpose vehicles etc. like other private failed banks, Bear Stearns, Lehman Brothers, Merill Lynch, Countrywide Finance, + others were bailed out for reported $13 trillion, except Lehman which became the sacrificial lamb allowed to fail.

The only example of a state bank, the Bank of North Dakota has been a resounding success. In the Economist November 2010 North Dakota had the 2d highest increase in median household income [1999-2009] of the 50 states +7.4%. The worst state was Michigan which -21%. Only 5 states grew, the other 45 declined. US average was -7.1%. [Census bureau]

North Dakota was the only state with a surplus in the most recent tax year. The ND state bank returns over 20% of its assets to the state each year.

Many other states are looking at North Dakota as a model.

susan February 2, 2011

Drastic spending cuts are being proposed and implemented in many states. However, state deficits are not the result of over-spending. They were caused by loss of revenue and increased borrowing costs resulting from the banking crisis. Toxic assets, derivatives, and the subprime mortgage debacle halted credit in the fall of 2008 and it has still not been recovered.

One state, North Dakota, has no funding problems, and this year it has a budget surplus of $1.3 billion, the largest it has ever had. North Dakota is a sparsely populated state of less than 700,000 people, largely located in cold and isolated farming communities. Yet, since 2000, the state’s GNP has grown 56 percent, personal income has grown 43 percent and wages have grown 34 percent.

Why is North Dakota doing so well, when other states are suffering the ravages of a deepening credit crisis? Its secret may be that it has its own credit machine. North Dakota is the only state in the Union to own its own bank. And, it is in generating credit for the state, that the Bank of North Dakota has been spectacularly successful. By providing affordable, low interest credit for business expansion, new businesses and students, the BND has helped North Dakota sidestep the credit crisis altogether.

The BND partners with private banks, providing a secondary market for mortgages; offers “wholesale” banking services such as check clearing and liquidity support to private banks; and invests in North Dakota municipal bonds to support economic development. In the last ten years, the BND has returned more than a third of a billion dollars to the state’s general fund. North Dakota is one of the few states to consistently post a budget surplus.

Unlike private banks, public banks don’t speculate or gamble on high risk “financial products.” They don’t pay outrageous salaries and bonuses to their management, who are salaried civil servants. The profits of the bank are all returned to the only shareholder – the people.

http://www.webofdebt.com/articles/washington_state.php

susan February 2, 2011

Drastic spending cuts are being proposed and implemented in many states. However, state deficits are not the result of over-spending. They were caused by loss of revenue and increased borrowing costs resulting from the banking crisis. Toxic assets, derivatives, and the subprime mortgage debacle halted credit in the fall of 2008 and it has still not been recovered.

One state, North Dakota, has no funding problems, and this year it has a budget surplus of $1.3 billion, the largest it has ever had. North Dakota is a sparsely populated state of less than 700,000 people, largely located in cold and isolated farming communities. Yet, since 2000, the state’s GNP has grown 56 percent, personal income has grown 43 percent and wages have grown 34 percent.

Why is North Dakota doing so well, when other states are suffering the ravages of a deepening credit crisis? Its secret may be that it has its own credit machine. North Dakota is the only state in the Union to own its own bank. And, it is in generating credit for the state, that the Bank of North Dakota has been spectacularly successful. By providing affordable, low interest credit for business expansion, new businesses and students, the BND has helped North Dakota sidestep the credit crisis altogether.

The BND partners with private banks, providing a secondary market for mortgages; offers “wholesale” banking services such as check clearing and liquidity support to private banks; and invests in North Dakota municipal bonds to support economic development. In the last ten years, the BND has returned more than a third of a billion dollars to the state’s general fund. North Dakota is one of the few states to consistently post a budget surplus.

Unlike private banks, public banks don’t speculate or gamble on high risk “financial products.” They don’t pay outrageous salaries and bonuses to their management, who are salaried civil servants. The profits of the bank are all returned to the only shareholder – the people.

OREGON STATE BANK? JUST ASKING FOR CORRUPTION! | Josiahe’s Blog February 2, 2011

[…] be loaned to people who banks won’t loan money to …… how is that a good idea?  Read the article.   Oh; and be sure to note the last line ….. then call your […]

State Banks and 'public' banking? - Stormfront February 5, 2011

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