What Wall Street Costs America: Say ‘No’ to Wall Street Fees with Public Banking

Arizona’s total debt service rose 94% between 2007-2014. Why is the state paying $312 million per year in interest on Wall Street debt when we could self-fund projects with public banking?
Arizona’s total debt service rose 94% between 2007-2014. Why is the state paying $312 million per year in interest on Wall Street debt when we could self-fund projects with public banking?

The cornerstone of my economic reform ideas is establishment of public banking at the state, county, and/or municipal levels.

In a nutshell, public banking advocates believe that austerity is a lie and that budget-cutting and layoffs by governments is unnecessary and harmful to citizens. There is plenty of money. The problem is that our taxpayer funds are held in too-big-to-fail banks on Wall Street and invested for the benefit of the banks’ shareholders– instead of being held here in Arizona and invested for the benefit of the citizens of Arizona. Public banks invest on Main Street for the public good — rather than allowing OUR MONEY to be gambled (and potentially lost… again) on Wall Street.

There are many ways a public bank could be constituted. For example, in my speech to the LD9 precinct committee members, I suggested taking 10% of the state’s surplus rainy day funds and using that to establish an infrastructure bank. This state bank could self-fund much needed improvements and new roads to make the state more competitive and easier to traverse. It also could lend money to counties and cities to build their projects. In turn, the state would make a modest interest rate on the loans.

Creation of a state public infrastructure bank would address several economic problems in one fell swoop:

  • Job Creation. Funding infrastructure projects around the state would create hundreds of good-paying jobs. Employment opportunities in construction and finance/banking administration would be directly created, but employment in other areas would increase as these workers buy goods and services, go out to eat, take trips, and otherwise recirculate their new-found income throughout the state’s economy. There will be a trickle down effect.
  • Infrastructure Development & Repair. Fixing and expanding the state’s infrastructure will improve our competitiveness and our collective quality of life.
  • Cost Savings. There would be millions of dollars in cost savings at all levels because the cities, counties and state would not be paying any Wall Street fees. Fees and interest on infrastructure projects can double the cost. Why follow our money back Wall Street and pay interest on it when we can be self-reliant and self-fund our needs?
  • Revenue Generation. When the state infrastructure bank makes a loan to a city, it would make a modest profit on the loan. These funds could be used to pay for other state needs– like fully funding education.
  • Investment in Ourselves. Starting with a modest investment in a specifically targeted public bank allows the state to dip its toe into public banking. Creation of a state bank is a big step. Many voters tell me that they like public banking but don’t trust the current Republican-controlled government and don’t want to give them any more power. Alternatively, the Arizona Legislature could help municipalities create public banks– for example by eliminating the requirement that city and county funds be FDIC insured. The City of Tucson’s two-year-old Community Banking Project is just such a first step down here in Baja Arizona. The City Council initially authorized $5 million in taxpayer funds be loaned to foster new local businesses and help others expand. It has been so successful that it was later increased to $10 million at this City Council Meeting (at about the 38 minute mark). In Mayor Jonathan Rothschild’s January newsletter, he said the Community Banking Project has lent $37 million locally since it started in late summer 2013. It’s time to take the next step, as the Cities of Santa Fe and Philadelphia are.

What Wall Street Costs America

The Public Banking Institute (PBI) has initiated an education project entitled “What Wall Street Costs America.” PBI and advocates around the country are learning to read Comprehensive Annual Financial Reports (CAFRs). All governmental bodies must issue annual CAFRs– including the State of Arizona (here), the State Retirement System (here), Pima County (here), Tucson (here), and Tucson retirement system (here). (With a quick Google search, you can find statements for other cities and counties, Pima Community College, and the University of Arizona.)

There is a lot to scroll through when studying the CAFRs, but the Wall Street jackpot can be found in the entries for “interest on long-term debt”, “debt service”, “management fees”, “fiscal agent fees” and/or “debt issuance costs.”

Pima County CAFR findings:
Principal: $81,933,000 (page 40)
Interest on Debt: $26,439,000
Total Debt Service: $108,372,000

Tucson CAFR Findings:
Principal: $49,743,385 (page 22)
Interest on Debt: $25,539,124
Fiscal agent fees: $23,625
Debt Issuance Cost: $1,197,267
Total Debt Service: $76,503,401

Arizona CAFR Findings:
Principal: $494,592,000 (page 47)
Interest and Other Charges: $312,024,000
Total Debt Service: $806,616,000

These are staggering sums of money in interest and fees, and it is likely the tip of the iceberg, since there are probably other fees and costs tucked into these reports. Is it time for public banking yet? I think so.

For more information about Arizonans for a New Economy, Arizona’s public banking Institute, check out our website here.

For more information about the What Wall Street Costs America, go to the Public Banking Institute here.

P.S. As of this writing, there is a state-owned bank task force bill in the Arizona Legislature (SB1301), introduced by Senator Andrea Dalessandro of Sahurita. It passed the Senate Financial Institutions Committee (6-1) in February. Please watch this bill and comment on Request to Speak and Arizona Voices.

Cross-posted from PowersForThePeople.net.


  1. After expanding to $1.2 billion in loans in the first 85 years in their existence, the North Dakota Public Bank has expanded to $3.5 billion in loans in the last 9 years. This explosion in loans perfectly coincides with the fracking boom in North Dakota. So do North Dakota home prices. Better wait to see how this plays out. Deposits with the North Dakota Public Bank are not guaranteed by the FDIC, they are guaranteed by the State of North Dakota.

    Also, North Dakota has half the number of people who live in the City of Phoenix. I’d be wary about drawing any wide conclusions about any experiment that they have performed. The Salt River Project, like the Bank of North Dakota, was formed by a group of farmers and has a similar culture and operates very efficiently and effectively when compared to private sector companies like APS. Farming culture, built up over millenia, is brutally competitive where working from dawn till dark is the norm and not a penny is wasted. There is no guarantee or even likelihood that a new public bank would get a transfusion of such a culture.

    • How about we just break up the big banks, and only allow local banking?

      No crossing state lines, and for for larger states, limit them further.

      The result would be banks that care about the local economy. They would make loan decisions on local needs, not ROI for Wall Street.

      And you’d create a few hundred CEO’s and staff all the way down to tellers, instead of having just 6 major banks and 6 CEOs. More jobs.

      Still private, but not Too Big To Fail.

      Still Capitalism, but controlled by local market forces, and so we avoid another 2008.

      How about that?

    • North Dakota has the population of Pima County. but with nearly three times as many community banks as Arizona, ND has a much more robust economy. This predates the fracking boom. (Also– now that the Saudis have burst the fracking bubble– the argument that ND is doing better than other states solely because of fracking holds no water.)

      North Dakota is the only state whose economy didn’t crash when Wall Street did in 2008 because their money was invested safely on Main Street and not on Wall Street. The crash was before the fracking boom.

      Forty percent of the banks worldwide are public banks. There is only one in the US because we allow ourselves to be controlled by Wall Street.

      Southern Arizona is losing new small business start-ups that are being incubated at the UA Tech Park because there is no entrepreneurial funding. Wells Fargo holds the City of Tucson’s money, the UA’s money and the UA Tech Park’s money. When the UA Tech Park VPs met with Wells Fargo and asked them to make start-up loans, they said, “No, we don’t do that.”

      • Oil production in North Dakota went from 60 million barrels in 2008 to 400 million barrels in 2014. Their Gross Domestic Product went from 32 billion in 2008 to 55 billion in 2014. Oil averaged $90 a barrel in 2014. 340 million times $90 a barrel equals $31 billion. It appears that almost all of the gdp increase was oil. In fact, their underlying economy appears to have shrunk a little.

        They are going to have one heck of a decompression headache with oil at $36 a barrel. What is going to happen to their bank? What is going to happen to all their depositors who don’t have FDIC?

        It’s an intriguing idea, lets see if it can withstand this stress test.

  2. Arizona is paying $312 million per year in interest on its debt. Multiply that by 49 states (since North Dakota is the only state smart enough to have a public bank), and you will realize that $650,000 is a tip in comparison.

  3. if we say no how will wall street be able to fund mrs. clinton’s campaign? Where will goldman saachs get the $650,000 to give hillary for her speaking fees?

    • Any candidate who needs contributions would have to come to us, not Wall Street. Any time Wall Street’s influence is diminished we win. But even better would be to get id of Citizen’s United by a constitutional amendment voted in by initiative and referendum by the people in those states with citizen’s initiatives, and legislatures in states without. On the other hand a quicker route is to elect Either Bernie or Hillary and get a new Supreme Court justice who feels that Citizen’s United was wrongly decided.

      • Yes – getting rid of Citizens United and gerrymandering and changing laws to guarantee universal automatic voter registration would dramatically change the political influence structure.

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