Scott Baker: Public Banking

Scott BakerPresident of Common Ground NYC, NY State Coordinator, Public Banking Institute and Mike Krauss – a former officer of county and state government, Executive Director of the Pennsylvania Republican State Committee and an advisor to regional and national political and public policy organizations.

March 23rd 2014 – they gave a presentation (see the slides) on the Public Banking option, answered questions and provided a few facts about how to fund a public bank in NY.

We had a great discussion about what can be done. The first step is to sign Scott Baker’s petition. It only takes a couple of minutes to look up, read, and commit one’s signature to the cause.

Meeting notes:

in community banks dividends go back to state

North Dakota only state with community banks has never failed
vs 500 banks elsewhere in the country

loaning more per capita via community banks than elsewhere in USA

North Dakota community banks were profitable even before boom of oil and gas via fracking
only bank with surplus during crisis

jpmorgan is not making loans to anyone, surely not helping the community

state with highest foreclosures:
fl, ca, ?

states with lowest foreclosures: Montana had 20 time fewer than nj

North Dakota had the lowest rate due to highest community / bank ratio

small banks are not doing well.
most losses according to FDIC insurance came from small banks/ less than 100m in asset

big banks are not helping communities not extending loans, making money via derivatives

assets of the few largest banks (5?) are 63% of GDP
smallest banks have vanished from 3000 to about 267(?) in September 2013

community bank model is not sustainable. also, Dodd-Frank regulations have crushed community banks.

top 5 banks have a credit exposure over 100%
when potential future exposure comes due they’ll be over exposed.
biggest banks are now bigger than before and more prone to fail.
state bank of North Dakota had state budget surplus in 2008/2009
economic growth came from Main Street not from investing in china.
had 21% return annually that went into state treasury while reducing tax burden.
keyman risk… probability that main people leave.
jpmc just paid 20m in fines. is the Lehman risk really a risk or maybe we need less Jamie dimons anyway.

industry has been promising 8% returns but didn’t work out like that. we had major corrections. we need alternate investment possibility.

ca has deficit on one side and surplus on the other. ca is borrowing money because there is a law preventing them to use locked up surplus money.

in case of public / private usually the public pays for privatization.

local and state governments can invest in Main Street via public bank

next steps:
1. find community leaders and enlightened leaders, media etc.

2. talk to unions and public employers and support community bankers

3. activate under employed and activist and community

4. promote online, hold press conference

5. have representatives sign petition. most importantly chair of banking committee. have her sign.
put pressure.

< send out link for slide show >

bank of North Dakota is a state dba.

we have power in numbers to force representatives to look at the issue. hoping to have them sign on to sandy’s bill that is looking for a public bank modeled after the bank of North Dakota . right now it only has 10 co-sponsors and we need more.

Q: is it possible to have a retail bank in the puts office?
A: post office is quasi governmental, there is overlap in constituencies. not the same but no conflict either. should be possible.

Q: what rating would you recommend?
A: reasonable assumption would be that it should be the same for public bank as for the state.

Q: is transparency the only difference (?) of public vs private bank?
A: structure is same paid as civil servants not by Jamie dimon. we might want to make it more independent and not be headed by governeur

A: once we have a big failure government will have to take over and it will make the depression look like nothing

Q: how small can a community be to have a public bank?
A: we looked at Princeton…57k. and some other communities
credit unions and communities could be customers of public banks

FDIC being underfunded is an understatement. they didn’t even try to bail out the 19 biggest banks. that’s why they got money from the treasury
they will turn your deposit into equity in the next big crisis.
we can’t extend credit indefinitely.