[CRNMC] [Fwd: From Ellen Brown a must read: Why public banks NOW and a road map to get there]

[Linda Jupiter]

Good morning, Agnes,
Thanks for the Ellen Brown articles. I wholeheartedly agree.
Hopefully, you’ll be meeting with the new Board of Supe, Woodhouse. If he’s for a public bank—great—we have our three votes. If he’s not, this is something the Community Rights Network should take on. We’re on a roll and once people understand how good this would be for our county, I’m sure we could get the signatures for the ballot and educate folks to vote.
In the previous election, we had an 18% turnout of voters; in this past election, we had 24%. We can keep increasing voter turnout if we have measures that will make a difference for we the people.
	http://ellenbrown.com/2014/10/12/building-an-ark-how-to-protect-public-revenues-from-the-next-meltdown/
Onward,
Linda


On Nov 8, 2014, at 12:19 PM, agnes at mcn.org wrote:

> ---------------------------- Original Message ----------------------------
> Subject: [Fwd: [Occupymendocino] Fwd: From Ellen Brown a must read: Why
> public banks NOW and a road map to get there]
> From:    agnes at mcn.org
> Date:    Sat, November 8, 2014 12:16 pm
> To:      CRNMC at lists.mcn.org
> --------------------------------------------------------------------------
> 
> Hi, Dear Friends,
>      Here is one of the reasons why we should be working to urge the
> County Board of Supervisors to pass an ordinance to establish a
> Mendocino County Public Bank very soon. We need all crn help to
> protect our county's public funds.
>     Also CJHolmes, who two years ago, worked with Occupy Mendocino and
> she produced 2DVDs explaining  how big banks planned the foreclosure
> debaucle leading to the 2007-08 economic crisis. She has sent another
> warning about the end of silver coins and a shortage of silver,
> further how we need to be producing things we can exchange without
> money, as happened in Greece which was asset stripped sending the
> country into bankruptcy.
> 
> from Agnes Woolsey
> 
> This is from Ellen Brown, the founder of the American public banking
> movement and its most thoughtful advocate. A must read.
> 
> Building an Ark: How to Protect Public Revenues from the Next Meltdown
> <http://ellenbrown.com/2014/10/12/building-an-ark-how-to-protect-public-revenues-from-the-next-meltdown/>
> Posted on October 12, 2014 by Ellen Brown
> 
> Concerns are growing that we are heading for another banking crisis, one
> that could be far worse than in 2008.  But this time, there will be no
> government bailouts. Instead, per the Dodd-Frank Act, bankrupt banks will
> be confiscating (or “bailing in”) their customers’ deposits
> <http://ellenbrown.com/2013/04/29/bail-out-is-out-bail-in-is-in-another-argument-for-publicly-owned-banks/>
> .
> 
> That includes local government deposits. The fact that public funds are
> secured with collateral may not protect them, as explained earlier here
> <http://www.webofdebt.com/articles/baliin.php>. Derivative claims now get
> paid first in a bank bankruptcy; and derivative losses could be huge,
> wiping out the collateral for other claims.
> 
> *I*n a September 24th article titled* “*5 U.S. Banks Each Have More Than 40
> Trillion Dollars In Exposure To Derivatives
> <http://theeconomiccollapseblog.com/archives/5-u-s-banks-each-have-more-than-40-trillion-dollars-in-exposure-to-derivatives>
> *,* Michael Snyder warns:
> 
> Trading in derivatives is basically just a form of legalized gambling, and
> the “too big to fail” banks have transformed Wall Street into the largest
> casino in the history of the planet. When this derivatives bubble bursts
> (and as surely as I am writing this it will), the pain that it will cause
> the global economy will be greater than words can describe.
> 
> The too-big-to-fail banks have collectively grown 37% larger since 2008.
> Five banks now account for 42% of all US loans, and six banks control 67%
> <http://theeconomiccollapseblog.com/archives/we-are-in-far-worse-shape-than-we-were-just-prior-to-the-last-great-financial-crisis>of
> all banking assets.
> 
> Besides their reckless derivatives gambling, these monster-sized banks have
> earned our distrust by being caught in a litany of frauds. In an article in
> *Forbes* titled “Big Banks and Derivatives: Why Another Financial Crisis
> Is Inevitable
> <http://www.forbes.com/sites/stevedenning/2013/01/08/five-years-after-the-financial-meltdown-the-water-is-still-full-of-big-sharks/>,”
> Steve Denning lists rigging municipal bond interest rates, LIBOR
> price-fixing, foreclosure abuses, money laundering, tax evasion, and
> misleading clients with worthless securities.
> 
> Particularly harmful to local governments
> <http://www.webofdebt.com/articles/interestrateswap.php> have been interest
> rate swaps misrepresented as protecting government agencies from higher
> rates.
> 
> Yet as Michael Snyder observes:
> 
> At this point our economic system is so completely dependent on these banks
> that there is no way that it can function without them. . . . We are
> steamrolling toward the greatest financial disaster in world history, and
> nobody is doing much of anything to stop it.
> 
> *Sidestepping the Steamroller*
> 
> California Governor Jerry Brown sees it coming. Rather than rebuilding the
> state’s crumbling infrastructure, rehiring teachers and other public
> employees, and taking other steps to restore the Golden State to its former
> prosperity, he has proposed a constitutional amendment
> <http://ellenbrown.com/2014/05/06/robbing-main-street-to-prop-up-wall-street-why-jerry-browns-rainy-day-fund-is-a-bad-idea/>
> requiring
> all excess state revenues to go into a rainy day fund to prepare for the
> next crisis.
> 
> But there is a better way forward.
> 
> In North Dakota – the only state to post a budget surplus every year since
> 2001 – the state owns its own bank. When the state last went over-budget in
> 2001 due to the Dot.com crisis, it merely issued itself an extra dividend
> through the Bank of North Dakota – the only state-owned depository bank in
> the country – and the next year it was back on track.
> 
> Other local governments would do well to follow suit, not just for the
> promising profit potential, but as protection against a “bail in” of
> public
> deposits.
> 
> Forming their own banks can also protect local governments from a looming
> and  unaffordable rise in municipal bond interest rates. State treasurers
> fear that the Fed’s September 2014 exclusion of municipal bonds
> <http://ellenbrown.com/2014/09/08/preparing-to-asset-strip-local-government-the-feds-bizarre-new-rules/>
> from
> the category of “high quality liquid assets” that big banks must hold
> will
> drive up bond rates, as it shrinks the market for those bonds and drives up
> the interest required to attract buyers.
> 
> There is also the big money local governments lose to Wall Street just in
> fees. A 2013 study found that the city of Los Angeles spends over $200
> million annually on big bank fees
> <http://d3n8a8pro7vhmx.cloudfront.net/seiu721/pages/1/attachments/original/1395715866/No_Small_Fees_A_Report_by_the_Fix_LA_Coalition.pdf?1395715866>
> and
> management – more than its budget to maintain its extensive streets and
> highways.
> 
> In a recent press conference
> <http://www.publicbankinginstitute.org/santa_fe_mayor_discusses_the_promise_of_public_banking>,
> Mayor Javier Gonzalez of Santa Fe raised provocative questions facing all
> elected officials today. He said:
> 
> Right now our bank is Wells Fargo.  They serve the City according to our
> contract.  But they also take city revenues, taxpayer dollars, and they use
> those taxpayer dollars as part of their loan portfolio that goes to places
> outside of Santa Fe and certainly outside of New Mexico.  And when you
> think of that most basic concept of taxpayer money being used to earn
> revenues for national banks that have reduced their small business lending
> by 53%, you have to pause and wonder – is this the best structure for our
> community?
> 
> Addressing these concerns, Mayor Gonzalez has launched a formal process to
> study the feasibility of a city-owned bank of Santa Fe. Public banking
> efforts are also underway in other cities and states.
> 
> *How to Start a Bank Overnight*
> 
> Forming a state or municipal public bank need not be slow or expensive. An
> online bank could be run out of the Treasurer’s office and operational in a
> few months. And the bank could be turning a profit immediately – without
> spending the local government’s own revenues.
> 
> How? The way Wall Street does it <http://www.cnbc.com/id/100497710#.> with
> our public deposits and investments: by leveraging. We could reclaim those
> funds and put them to work for our local economies.
> 
> The bank could be capitalized with a bond issue (borrowing from the
> public), and this capital could be leveraged into a loan portfolio that is
> about eight times the capital base. The bond issue could be financed with
> 1/8th of the interest accruing from this portfolio. The remaining 7/8th could
> be pocketed as profit.
> 
> This profit could be earned immediately and without risk, by buying
> municipal bonds rather than issuing loans. That move could also help
> municipalities, by guaranteeing that their bond rates remain low in the
> face of threatened interest rate rises on the private market.
> 
> *How to Start a Bank at Virtually No Cost or Risk*
> 
> To demonstrate the safety and viability of the model, the bank can start
> small and build from there. For startup capital
> <http://www.huffingtonpost.com/2010/03/19/how-to-start-your-own-ban_n_497261.html>,
> a new bank needs anywhere from a few million to $20 million nationwide.
> (The amount varies from state to state.) To be cautious and conservative,
> however, let’s say $40 million.
> 
> Many cities have this money available in “rainy day” or reserve funds.
> Many
> others have substantial investments, often underperforming, that could be
> more responsibly invested as an equity position in a bank. In California,
> for example, a whopping $55 billion is languishing in the Treasurer’s
> Pooled Money Investment Account, earning a mere 0.23% interest
> <http://www.treasurer.ca.gov/pmia-laif/performance/pmia-laif_perform.pdf>.
> 
> Moving a portion of those funds into the state’s own bank would just be
> good portfolio management. State pension funds are another investment
> option.
> 
> If surplus funds are not available, capital can be raised with a bond
> issue. (That is how the Bank of North Dakota got its start in 1919.) Assume
> the interest due on these bonds is 3%. The local government’s cost of funds
> will be $1.2 million annually.
> 
> At a 10% capital requirement, $40 million is sufficient to capitalize $400
> million in loans. But again assume the bank is started conservatively at a
> 20% capitalization, for a loan portfolio of $200 million.
> 
> To make those loans, the bank will need deposits. These can be acquired
> without advertising or other costs, by moving $200 million out of the local
> government’s existing deposit account at JPMorgan Chase or another Wall
> Street bank. (In North Dakota, all of the state’s revenues are deposited by
> law in its state-owned bank.) Assume the new bank pays 0.3% interest on
> these deposits, or $0.6 million annually as its cost of funds.
> 
> To satisfy the 10% reserve requirement for deposits (something different
> from the capital requirement), $20 million of this deposit pool would be
> held in reserve. The remaining $180 million are counted as “excess
> reserves,” which can be used to make an equivalent sum in loans or bond
> purchases.
> 
> Assume the excess reserves are used to buy local municipal bonds paying 3%
> annually. The return to the bank will be $5.4 million less $0.6 million in
> interest on the deposits, for a total of  $4.8 million annually.
> 
> To recoup the cost of the bond issue, $1.2 million can be paid from these
> profits as a dividend to the local government. The bank will then have a
> net profit of $3.6 million annually; and this profit will have accrued to
> the local government as the bank’s owner, without needing to advance any
> money from its own budget.
> 
> What if the state needs its deposits for its budget?
> 
> That is the beauty of being a bank rather than a revolving fund: *banks do
> not actually lend their deposits*, as the Bank of England recently
> acknowledged
> <http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf>.
> Rather, they*create *deposits when they make loans. If the state or local
> government needs more cash for its operating expenses than the bank has
> kept in reserve, the bank can do what all banks do: it can borrow. And if
> it has grown to be a large bank, it can borrow quickly and cheaply – from
> other banks through the Fed funds market at 0.25%, or from the money market
> at 0.15%.
> 
> A smaller public bank might want to keep a larger cushion of deposits in
> reserve for liquidity purposes. If it keeps 30% in reserve, in the above
> example $140 million would be left to invest in bonds, generating $4.2
> million annually in interest. Deducting $1.8 million as the cost of
> servicing deposits and capital, the bank would still generate $2.4 million
> in profit, while providing a safe place to park public revenues.
> 
> What of the bank’s operating costs? These can be kept quite low. The Bank
> of North Dakota operates without branches, tellers, ATMs, retail services,
> mega-salaries or mega-bonuses. All those saved costs fall to the bank’s
> bottom line.
> 
> Ballpark operating expenses for a small but growing public bank with a
> President, Chief Financial Officer, Chief Lending Officer, Chief Credit
> Risk Management Officer, Compliance Officer, and the systems required to
> support a banking function are estimated at under $1 million per year. A
> start-up focused on municipal bonds could be operated for even less. This
> expense could come out of the initial $40 million in capitalization, again
> without impairing the local government’s own operating budget.
> 
> *Manifesting the Bank’s Full Potential*
> 
> Once a charter has been obtained and sound banking practices have been
> demonstrated, the capital ratio can be dropped toward 10%. When the bank
> has built up a sufficient capital cushion, it can begin to work with
> community banks and other financial institutions for the broad range of
> commercial lending that creates jobs and prosperity and generates profits
> as non-tax revenue for the municipality, following the Bank of North Dakota
> model.
> 
> The public bank can also invest in infrastructure loans to the state or
> local government itself. Interest now composes about half
> <http://ellenbrown.com/2014/06/01/infrastructure-sticker-shock-financing-costs-more-than-construction/>
> of
> capital outlays for public projects. Since the local government will own
> the bank, it will get this interest back, cutting infrastructure costs in
> half.
> 
> These are just a few of the possibilities for a publicly-owned bank, which
> can provide security from risk while generating a far greater return on the
> local government’s money than it is getting now on its Wall Street deposit
> accounts. As we peer into the jaws of another economic meltdown, moving our
> public funds into our own banks is an investment we can hardly afford not
> to make.
> 
> ________________________
> 
> Ellen Brown is an attorney, founder of the Public Banking Institute
> <http://publicbankinginstitute.org/>, and author of twelve books, including
> the best-selling Web of Debt <http://webofdebt.com/>. In The Public Bank
> Solution <http://publicbanksolution.com/>, her latest book, she explores
> successful public banking models historically and globally. Her 200+ blog
> articles are at EllenBrown.com <http://ellenbrown.com/>.
> http://ellenbrown.com/2014/10/12/building-an-ark-how-to-protect-public-revenues-from-the-next-meltdown/
> Mike
> Mike Krauss
> Chair, the Pennsylvania Project
> Director, the Public Banking Institute
> Skype: mikekrausscomments
> www.publicbankingpa.org
> TO UNSUBSCRIBE: send an email to occupymendocino at lists.mcn.org put
> "Un-Subscribe me" in the Subject line.
> For listserv problems please contact: listmanager at mcn.or
> 
> 
> _______________________________________________
> crnmc-media mailing list
> To post to list, send e-mail To: crnmc-media at crnmc.org
> To Subscribe, Unsubscribe, Change Settings, or View Archives go to
> http://lists.crnmc.org/mailman/listinfo/crnmc-media

-------------- next part --------------
An HTML attachment was scrubbed...
URL: http://lists.mcn.org/pipermail/crn/attachments/20141109/665f941a/attachment.html