The Growing Movement for Publicly Owned Banks
Continued from previous page
Senate Democratic Leader Mike Prusi (D-Ishpeming) stated:
Michigan’s economy has been suffering, and working families in the state have had difficulty keeping up with credit card bills, college tuition prices and mortgage payments. Establishing the Michigan Development Bank will keep our hard-earned dollars right here in the state to invest in small business, create good-paying jobs to get people back to work, and help protect the middle class.
Also quoted was Senator Hansen Clarke (D-Detroit):
With the current state of our economy, every dollar counts, yet we’re depositing our money in other people’s pockets by investing in big corporate banks without seeing much lending in return. It’s time for the Mitten State to lend itself a helping hand and establish a bank that is willing to invest in our small businesses and offer the financial support necessary to see job growth.
For start-up capital, the Senate Democrats suggested that Michigan could sell voter-approved bonds. With an initial capitalization of $150 million, they estimated the bank could lend up to $1 billion to small businesses, students and farmers, and offer low-interest credit cards to consumers. For deposits, the bank could follow the model of the Bank of North Dakota and use state revenues. So says Gene Taliercio, a Republican candidate for the state Senate, who has also put his weight behind the Michigan Development Bank. In a video clip on the website of the local Oakland Press, he says, “We’re talking about restructuring the whole tax system, in the sense that the way it's set up is that all taxes are going to go into this central bank ... Every dollar that the state of Michigan makes goes into this bank.”
The State Bank of Washington
A similar bill, HB 3162, was introduced to the Washington State Legislature on February 1. The bill has generated so much interest that Steve Kirby, chair of the Financial Institutions and Insurance Committee, has scheduled a special work session on it. According to John Nichols in The Nation, the State Bank of Washington was formally proposed by House finance committee vice chair Bob Hasegawa, a Seattle Democrat. Nichols quotes Hasegawa:
Imagine financing student aid, infrastructure, industry and community development. Imagine providing access to capital for small businesses, or otherwise leveraging our resources instead of having to do it with tax incentives. Imagine keeping our resources local instead of exporting them as profits, never to be seen again—that’s what this bank could do.
Leveraging, rather than taxing, is how private banks have been creating “credit” for centuries. States could do the same thing, cutting the middlemen out of the equation, saving significant sums in interest and fees and generating revenue for the state.
A nonpartisan analysis of the Washington bill prepared for the state legislature noted that the bank would be the depository for all state funds and the funds of state institutions, and that these deposits would be guaranteed by the state. The bank would be run by a board of 11 members and would be chaired by the State Treasurer. It would have the same rules and privileges as a private bank chartered in the state. Since current law prohibits the state from lending credit and investing in private firms, voters would have to approve the state Constitution to get the bank off the ground.
The Community Bank of Illinois
A third bill, introduced by Illinois Representative Mary Flowers, is on its way through the legislative process in Illinois. According to the Illinois General Assembly website, the Community Bank of Illinois Act would establish a state bank with the express purpose of boosting agriculture, commerce, and industry. State funds and money held by penal, educational, and industrial institutions owned by the state would be deposited in the bank and would serve as reserves for making loans. The bank could also serve as a clearinghouse for other banks, including handling domestic and foreign exchange; and it could buy property under eminent domain. All deposits would be guaranteed with the assets of the state. The Bank would be managed and controlled by the Department of Financial and Professional Regulation, with input from an advisory board representing private banking and public interests.