Austerity is a lie.
We have plenty of money.
The problem is that it is being gambled on Wall Street, instead of being invested on Main Street.
That is the message of public banking.
The State of Arizona– and 48 other states– allow billions of dollars in taxpayer funds to be invested for the benefit of Bank of America, JP Morgan CHASE, Wells Fargo, and other Wall Street banks who our hold rainy day funds. Shareholders in those “too-big-to-fail” banks make money on OUR money, while we are told to “tighten our belts”. The only state whose economy didn’t crash in 2008-09 was North Dakota because the State of North Dakota created a public bank in 1919 and invests its money at home, rather than allowing Wall Street to invest ND funds for the benefit of Wall Street shareholders. Forty percent of the world’s banks are public banks, but there is only one in the US because our country and our government are controlled by Wall Street.
Public banking advocates across the country are working on state and municipal public banking initiatives. Public banking initiatives have been proposed by both Republicans and Democrats in multiple sessions of the Arizona Legislature. This year, there are multiple bills addressing public banking and/or the health of community banks in Arizona.
The most promising bill is SB1395, proposed by Southern Arizona Senator Andrea Dalessandro, a long-term public banking advocate which would establish a task force to study the feasibility of establishing a state bank of Arizona. SB1395 will be heard by the Senate’s Financial Institutions Committee on Wednesday, February 18, 2015.
Three members of the committee are strong public banking supporters: Committee Chair Senator David Farnsworth (R) and Senator Steve Farley (D). Yes– this has support from both sides of the aisle.
Farley, Farnsworth and other Democrats and Republicans also have sponsored several pieces of legislation this session that would look at public banking issues.
- SB1337 would establish a system of monitoring the health of community banks. (Community banks are failing in Arizona. If they are allowed to dry up and blow away, we’ll really be at the mercy of Wall Street.)
- SB1076 would establish a teacher-student loan program. (The Arizonans for a New Economy emphasizes that public banking can help people with debt relief and low-cost student loans.)
- SB1338 and SB1336 relax banking fees and the regulations for establishing a bank in Arizona. (These would make it easier to establish a “bank”, but hopefully these would not lead the way to more risky/expensive loan operations like the payday loans or the title loans. Arizonans for a New Economy supports making affordable credit more available for local, small businesses, entrepreneurs, students, and farmers, BUT we don’t support predatory lending by payday loan businesses.)
Public Banking the the Arizona House
On the House side, Representative Juan Jose Mendez has proposed HB2270 to establish a state bank. Although, establishment of a state bank is the goal of Arizonans for a New Economy, we see several problems with HB2270.
- HB2270 is too much too soon. SB1395 (establishing a state bank feasibility study) is a good first step because it outlines the needs of the state and establishes background date. SB1337 is also good because it monitors the health of community banks. These two Senate bills study the problem before jumping in.
- There are serious governance issues with SB2270. When Arizonans for a New Economy presents around the state, one of the first questions from the audience is: Who manages this bank? Most people DON’T want the Arizona Legislature or the governor to run the bank (probably a good idea given the dismal fiscal performance and huge debt our state has). SB2270 hands the reigns of the “Bank of Arizona” over to the politicians. Professional bankers should run the state banks– not politicians.
- The state bank established by HB2270 would end in 10 years. What’s up with that? The Bank of North Dakota has been supporting businesses, community banks, and the people of North Dakota since 1919. Automatically sunsetting a good idea is a bad idea.
- The Bank of North Dakota has helped that sparsely-populated, rural state thrive because its charter dictates that investments should be made for the public good. HB2270 give no such guidance to the Bank of Arizona. Arizonans for a New Economy advocates for banking in the public interest. Allowing politicians to control the bank and not specifically declaring that the bank should invest for the public good are two major flaws of HB2270; Arizonans for a New Economy does not support this bill.
It’s exciting that both Republicans and Democrats in the Arizona Legislature are are considering public banking as a nonpartisan economic solution to raise revenue without raising taxes.
[Disclosure: My husband and I are co-directors of Arizonans for a New Economy, a non-profit organization promoting the establishment of state and municipal banks. Learn more on our website, our Facebook page and our YouTube site.]