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    Posted January 28, 2014 by

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    Ellen Brown: Honest, Intelligent, Patriotic, Thinking Reformer to Run For California State Treasurer in 2014: Part 2


    The North Dakota Model: Banking that Supports Rather Than Exploits the Local Economy

    California’s revenues are currently parked in those very largest of  corporations, Wall Street banks. These out-of-state banks use our giant  asset pool for their own speculative purposes, and the funds are at risk of confiscation in the event of a “bail-in.”

    In North Dakota, by contrast, all of the state’s revenues are  deposited by law in the state-owned Bank of North Dakota (BND). The BND  is set up as a DBA of the state (“North Dakota doing business as the  Bank of North Dakota”), which means all of the state’s capital is  technically the bank’s capital. The bank uses its copious capital and  deposit pool to generate credit for local purposes.

    The BND is a major money-maker for the state, returning a sizable  dividend annually to the treasury. Every year since the 2008 banking  crisis, it has reported a return on investment of between 17 percent and  26 percent. The BND also provides what is essentially interest-free  credit for state projects, since the state owns the bank and gets the  interest back. The BND partners with local banks rather than competing  with them, strengthening their capital and deposit bases and allowing  them to keep loans on their books rather than having to sell them off to  investors. This practice allowed North Dakota to avoid the subprime  crisis that destroyed the housing market in other states.

    Consider the awesome potential for California, with its massive  capital and deposit bases. California has over $200 billion stashed in a  variety of funds identified in its 2012 Comprehensive Annual Financial Report (CAFR), including $58 billion managed by the Treasurer in a Pooled Money Investment Account currently earning a meager 0.264% annually. It also has over $400 billion in its pension funds (CalPERS and CalSTRS).

    California’s population of 37 million is more than 50 times that of  North Dakota. In 2010, the BND had about $4,500 in deposits and $4,200  in loans per capita.  Multiplying 37 million by $4,200, a State Bank of  California could, in theory, generate $155.4 billion in credit for the  state; and this credit would effectively be interest-free free, since  the state would own the bank.

    What could California do with $155 billion in interest-free credit?  One possibility would be to refinance its ominous “wall of debt” at 0%. A  debt that is interest-free can be rolled over indefinitely without cost  to the taxpayers.

    Another possibility would be to fund public projects interest-free. Eliminating interest has been shown to reduce the cost of public projects by 35% or more.

    Take, for example, the San Francisco Bay Bridge earthquake  retrofitting boondoggle, which was originally slated to cost about $6  billion. Interest and bank fees wound up adding another $6 billion to  the overall cost to taxpayers. Funding through its own bank could have  saved the state $6 billion or 50% on this project.

    Then there is the state’s bullet train fiasco, which has been beset  with delays, cost overruns, and funding issues. As with the Bay Bridge, costs are projected to double as a result of compounding interest on long-term bonds, imposing huge  hidden costs on the next generation of taxpayers. By funding the bullet  train through a state-owned bank, its costs, too, could be reduced by  50%.

    Public banking models globally and historically are explored in my books The Web of Debt (first published in 2007) and The Public Bank Solution (published in 2013). I have also written over 200 articles on this and related subjects, which can be found on my blog at ellenbrown.com.

    To get on the ballot we need 10,000  California signatures or a $2,800 filing fee.  If you live in California  and would be willing to sign a petition or collect signatures, click on the petition button above. To donate, click on the donate button.  Thanks!



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