financing. We also have strategic investment tools such as the Oregon Growth Account that could be better utilized as part of this framework.
Banks “create” money by leveraging their capital into loans. At an 8% capital requirement, they can leverage capital by a factor of twelve, so long as they can attract sufficient deposits (collected or borrowed) to clear the outgoing checks. States give this leveraging power away when they put their deposits in Wall Street banks and invest their capital there.
State and municipal governments have assets tucked all over the state in separate rainy day funds, which are largely invested in Wall Street banks for a very modest return. At the same time, states are borrowing from Wall Street at much higher interest rates and have to worry about such things as credit ratings, late fees, and interest rate swaps, which have proven to be very good investments for Wall Street and very bad investments for local governments.
By consolidating their assets into their own state-owned banks, state and local governments can leverage their own funds to finance their own operations; and they can do this essentially interest- free, since they will own the bank and will get the interest back. The BND contributed over $300 million to state coffers in the past decade, a notable achievement for a state with a population that is less than one-tenth the size of Los Angeles County.
The growing movement to establish local economic sovereignty through state- owned banks has been a grassroots effort that has grown spontaneously in
Omtimes.com
response to unmet needs for local credit. In Oregon, the push has come from an active volunteer group called Oregonians for a State Bankworking with the Working Families Party. In
Washington, theMain Street Alliance has played a major role. The Alliance is a project of what is now called the Alliance for a Just Society (formerly NWFCO), a coalition of several northwest states’ Citizen Action Networks and others. The chief legislative champion in Washington State is Rep. Bob Hasegawa. In Maryland, the campaign was initiated by the Wisconsin-based Center for State Innovation (CSI), theService Employees International Union (SEIU) and the Progressive States Network. Progressive Maryland is a prominent NGO supporter. Detailed analyses of the Washington and Oregon initiatives and their projected benefits have been done by CSI. For grassroots efforts in other states and for petitions that can be signed, see
http://publicbankinginstitute.org/sta te-info.htm.
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