Very interesting article - don't know if it can be extended to a wider
scale, but it would be interesting to try....
http://www.alternet.org/corporate-accountability-and-workplace/why-socialism-doing-so-darn-well-deep-red-north-dakota?akid=10253.111339.dBIQl5&rd=1&src=newsletter816540&t=4&paging=off
Corporate Accountability and WorkPlace
AlterNet / By Les Leopold
Comments
Why Is Socialism Doing So Darn Well in Deep-Red North Dakota?
North Dakota's thriving state bank makes a mockery of Wall Street's
casino banking system -- and that's why financial elites want to crush
it.
Photo Credit: Stutterstock.com
March 26, 2013 |
North Dakota is the very definition of a red state. It voted 58
percent to 39 percent for Romney over Obama, and its statehouse and
senate have a total of 104 Republicans and only 47 Democrats. The
Republican super-majority is so conservative it recently passed the
nation's most severe anti-abortion resolution – a measure that
declares a fertilized human egg has the same right to life as a fully
formed person.
But North Dakota is also red in another sense: it fully supports its
state-owned Bank of North Dakota (BND), a socialist relic that exists
nowhere else in America. Why is financial socialism still alive in
North Dakota? Why haven't the North Dakotan free-market crusaders
slain it dead?
Because it works.
In 1919, the Non-Partisan League, a vibrant populist organization, won
a majority in the legislature and voted the bank into existence. The
goal was to free North Dakota farmers from impoverishing debt
dependence on the big banks in the Twin Cities, Chicago and New York.
More than 90 years later, this state-owned bank is thriving as it
helps the state's community banks, businesses, consumers and students
obtain loans at reasonable rates. It also delivers a handsome profit
to its owners -- the 700,000 residents of North Dakota. In 2011, the
BND provided more than $70 million to the state's coffers. Extrapolate
that profit-per-person to a big state like California and you're
looking at an extra $3.8 billion a year in state revenues that could
be used to fund education and infrastructure.
One of America's Best Kept Secrets
Each time we pay our state and local taxes -- and all manner of fees
-- the state deposits those revenues in a bank. If you're in any state
but North Dakota, nearly all of these deposits end up in Wall Street's
too-big to-fail banks, because those banks are the only entities large
enough to handle the load. The vast majority of the nation's 7,000
community banks are too small to provide the array of cash management
services that state and local governments require. We're talking big
bucks; at least $1 trillion of our local tax dollars find their way to
Wall Street banks, according Marc Armstrong, executive director of the
Public Banking Institute.
So, not only are we, as taxpayers, on the hook for too-big-to-fail
Wall Street banks, but we also end up giving our tax dollars to these
same banks each and every time we pay a sales tax or property tax or
buy a fishing license. In North Dakota, however, all that public
revenue runs through its public state bank, which in turn reinvests in
the state's small businesses and public infrastructure via
partnerships with 80 small community banks.
How the State Bank Creates Jobs
Banks are supposed to serve as intermediaries that turn our savings
and checking deposits into productive loans to businesses and
consumers. That's how jobs are supported and created. But the BND, a
state agency, goes one step further. Through its Partnership in
Assisting Community Expansion, for example, it provides loans at below-
market interest rates to businesses if and only if those businesses
create at least one job for every $100,000 loaned. If the $1 trillion
that now flows to Wall Street instead were deposited in public state
banks in all 50 states using this same approach, up to 10 million new
jobs could be created. That would effectively end our destructive
unemployment crisis.
No Bailouts for the BND
Banking doesn't have to be a casino. It doesn't have to be designed to
create gambling opportunities so bank traders and executives can make
seven- and eight-figure salaries. As BND president Eric Hardmeyer said
in a 2009 Mother Jones interview:
We’re a fairly conservative lot up here in the upper Midwest and we
didn’t do any subprime lending and we have the ability to get into the
derivatives markets and put on swaps and callers and caps and credit
default swaps and just chose not to do it, really chose a Warren
Buffett mentality—if we don’t understand it, we’re not going to jump
into it. And so we’ve avoided all those pitfalls.
As state government employees, BND executives have no incentive to
gamble their way toward enormous pay packages. As you can see, the top
six BND officers earn a good living, but on Wall Street, cooks and
chauffeurs earn more.
Eric Hardmeyer, President and CEO: $232,500
Bob Humann, Chief Lending Officer: $135,133
Tim Porter, Chief Administrative Officer: $122,533
Joe Herslip, Chief Business Officer: $105,000
Lori Leingang, Chief Administrative Officer: $105,000
Wally Erhardt, Director of Student Loans of North Dakota: $91,725
The very existence of a successful BND undermines Wall Street's claim
that in order to attract the best talent big banks need to offer
enormous pay packages. Yet somehow, North Dakota is able to find the
talent to run one of the soundest banks in the country? The BND is
living proof that Wall Street's rationale for sky-high executive pay
is a self-serving fabrication. (For more information on financial
inequality please see my latest book, How to Earn a Million Dollars an
Hour, Wiley, 2013.)
Wall Street Is Gunning for Bank of North Dakota
As you can well imagine, our financial elites would love to see this
successful (socialist!) bank disappear. Its salary structure and local
investments makes a mockery of Wall Street's casino banking system.
But the bigger threat comes from the possible spread of this public
banking concept to other states. Already, there are 20 or so state
legislatures that are exploring state banks. Collectively, more public
banks would pose an enormous threat to the $1 trillion in state and
local bank deposits that now run through Wall Street.
But elite financiers also stand to lose much more. In the 49 states
without a public bank, there's no safe place to turn for loans to
rebuild schools and finance other public infrastructure projects. That
creates an enormous opportunity for Wall Street firms to hook
localities on expensive bond programs -- like capital appreciation
bonds, which can lead to repayments equaling 10 times the original
loan. Investment bankers and advisers also make enormous fees by
selling expensive, high-risk financial schemes to state and local
governments (read an investigative report here). But such schemes are
useless in North Dakota where the state bank provides the capital the
state needs for a fraction of the long-term costs.
Trade Agreements: Wall Street's Weapon of Mass Destruction
Clearly, from Wall Street's perspective, the North Dakota bank must
go, and all other state efforts to replicate it must be thwarted. Wall
Street's stealth weapon may be lodged within the latest corporate
trade agreement called the Trans-Pacific Partnership (TPP), which
currently is being negotiated in secret. We already know that Wall
Street is seeking to remove all tariff restrictions that prevent the
U.S. financial services industry from doing business in countries like
Brunei, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and
Vietnam. The biggest banks also want the treaty to eliminate "non-
tariff" barriers including regulations that create "unfair"
competition with state-owned financial enterprises.
Depending on the final language, it is possible that the activities of
the Bank of North Dakota could be ruled illegal because "foreign
bankers could claim the BND stops them from lending to commercial
banks throughout the state," according to an analysis by Sam Knight in
Truthout. How perfect for Wall Street: a foreign bank can be used as a
shill to knock out the BND.
The Public Bank Movement
A small but highly dedicated group of financial writers, public
finance experts and former bankers have formed the Public Bank
Institute to spread the word. Working on a shoestring budget, its
president Ellen Brown (author of Web of Debt), and its executive
director Marc Armstrong, a former wholesale banker, have become the
Johnny Appleseeds of public banking, hopping from state to state to
encourage legislatures to explore state-owned banks.
The movement is gathering steam as it holds a major conference on June
2-4 at Dominican University in San Rafael, CA featuring such anti-Wall
Street hell raisers as Matt Taibbi and Gar Alperowitz, along with
Brigitte Jonsdottir, a member of the Icelandic parliament, and Ellen
Brown.
Is America Up For This Fight?
Since the crash, the financial community has largely managed to
wriggle off the hook. In fact, fatalism may be replacing activism as
we sense that maybe Wall Street is simply too big and too powerful to
change. After all, the big banks seem to own Washington, as too-big-to-
fail banks are permitted to grow even larger and more invulnerable to
prosecution and control.
But this new public banking movement could have legs, especially if it
teams up with those fighting for a financial transaction tax (see
National Nurses United.) Most Americans remain furious about how
financial elites profited from the crisis -- before, during and after
-- while the rest of us pick up the tab. Americans know deep down that
Wall Street is the predator and we are the prey.
The state-owned and operated Bank of North Dakota proves that it
doesn't have to be that way. This is the time to fight for public
state banking in a big way.
You game?
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