1.
Presented by:
To:
Date:
Scott Baker, NY State Coordinator,
Public Banking Institute
SSBAKER305@YAHOO.COM
SYMPOSIUM ON PUBLIC BANKING
December 14, 2014

2.
“We don’t have the money!”
An all too familiar refrain.
Options have been limited to:
• Cut spending
• Raise taxes
• Sell off public assets
This argument is getting old!

3.
Federal Option is off the table.
In January 2009, President Obama said the Fed might
bail out hard-hit state and municipal governments. But
the Fed says they are on their own.
Wall Street Journal, January 8, 2011:
“We have no expectation or intention to get
involved in state and local finance,” Mr.
Bernanke said in testimony before the Senate
Budget Committee. The states, he said later,
“should not expect loans from the Fed.“

4.
Federal Option is off the table
NO RESCUE
FOR YOU!
$191B would
Rescue all the
states…
$16T has gone to
the banks - 2012
audit of the Federal
Reserve

5.
“We don’t have the money!”
Solutions have been limited to:
• Cutting spending
• Raising taxes
• Selling off public assets
No federal rescue.
But now, there’s a new option:
• Invest in our own citizens
The public can own its own bank!

6.
Community banks
(Interest)
Dividends
& Local Needs

7.
A typical Systemically
Important Financial Institution
(SIFI) like JP Morgan has just a
31% Loan to Asset ratio – less
than ½ of ND’s community
banks. SIFIs don’t make most
of their money by making
loans!

8.
The States with the Most Community Banks Generally
have the fewest Foreclosures…and Vice Versa
Foreclosure Rates for the
U.S.
January 2014
U.S.: 1 in every 1058
Worst 5 States:
Florida: 1 in every 346
Nevada: 1 in every 533
Maryland: 1 in every 543
Illinois: 1 in every 603
New Jersey: 1 in every 619
Best 5 States:
North Dakota: 1 in 106,489
Vermont: 1 in 26,854
Mississippi: 1 in 13,851
Nebraska: 1 in 12,654
Montana: 1 in 10,698

9.
Small Banks are Disappearing

10.
The Big Banks get Bigger…but do not increase their
Percentage of Loans to the Community

11.
Small Banks’ Share of Assets Continues to Decline
"Fifteen years ago, the assets of the six largest banks in
this country totaled 17 percent of GDP…The assets of the
six largest banks in the United States today total 63 percent
of GDP.” Senator Sherrod Brown on Sunday, April 25th, 2010 in an
interview on ABC’s "This Week.”
 The largest 25 domestically chartered
banks in the country control about two-thirds
of all the assets held by domestically
chartered banks.
 There were 2,118 U.S. banks with less
than $100 million of assets at Sept. 30,
2013, down from more than 3,000 at the
end of 2008 - FDIC

12.
And what do these Big Banks do with the Bulk of their Assets?

13.
The biggest banks are now
even bigger than ever.
Are they still Too Big To
Fail…or will they actually
Fail next time?
The operations of the TBTF
banks have been compared to a
Casino, but this is unfair…to
Casinos! In a Casino, you have
consistent rules, and if you go
bust, you don’t get bailed out,
you get thrown out.

14.
New option: Create a state-owned bank
North Dakota owns its own bank –
and therefore it creates its own credit.
As a result, North Dakota’s options are to:
• Expand public services
• Lower taxes
• Increase their bank’s capital, to make even
more credit available to the people of North Dakota
No need for a federal rescue.

15.
The North Dakota experience:
• State-owned bank established 1919
• State budget surpluses 2008-2009
• Lowest unemployment in U.S.
• Lowest foreclosure rate
• The most local banks per capita
• No bank failures in over 20 years*
• Bank funds economic growth, from Main Street
to high tech to oil production
* Proper risk analysis should include more than that for the Public Bank itself. North Dakota
has had no bank failures in over 20 years, while there were 517 bank failures through the end of
Sept, 2013 nationwide since 2000, says the cash-strapped FDIC, which has to pick up the pieces.

16.
Profit the People
• The Bank of North Dakota (BND) earns 20+% annual
return on equity by investing within the state.
• BND’s profits ($300M over 10 years) go to the state
treasury, reducing tax burdens while supporting
public services.
Why are our tax dollars supporting Wall Street?
Why not invest in-state? For education? Higher
education? Renewable energy? Tech startups?
Infrastructure?

17.
Rating and Staffing: Learning from the
Bank of North Dakota
• Standard & Poor's (S&P) maintained Bank of North Dakota's
(BND) credit ratings in its latest review of the Bank released July
23, 2013. Its long-term issuer credit rating remained "AA-" and
its short-term issuer credit rating to "A-1+”
• What about “key man” risk? What is the risk of key
executives leaving and what does that portend for the
safety of the bank? Maybe this is an over-rated fear.
While Jamie Dimon makes millions running JP Morgan
Chase, the president of the Bank of North Dakota – a Civil
Servant - earns about $300 thousand a year. Which is
the safer, better-run bank?
JP Morgan recently paid over $20 billion in fines for
multiple Civil violations (not criminal…so far). The BND
has never been found guilty of securities or bank fraud.
What are we paying for?

18.
Invest in Our Own Citizens
Meanwhile, public pension funds in most states have lost
billions of dollars.
What if these funds were used to own a state bank?
And invested in their own citizens, as North Dakota does?

19.
What are Our Assets Right Now?
Check the Comprehensive Annual Financial Reports…
 $181 billion in NY State Fiduciary Net Position (March 31, 2014, p. 44)*
 $192 Billion in NY City Fiduciary Net Position (June 30, 2014, p. 52)*
 ~$135m in Orange County total Net Gov’t Fund balances (Dec. 31, 2013)*
 There are 10s of billions in other NY liquid funds too
* Does not include fixed capital
What if 10% of these liquid funds were reallocated to a Public Bank?**
OK, these assets are not quite a Money Tree, but they are
money that can be loaned into the community, often with
higher expectations of return than investments on Wall
Street.
Remember: it is not under-funding that hurts pension
fund reliability, it is under-performance and volatility.
** By comparison, the Bank of North Dakota has $6.9B in assets (2014 FS)

20.
Other Municipalities are Investigating
Alternate Investment strategies
 20 bills in 15 States* considering some form
of State Banking Legislation – and many
municipalities are too. Many of these
proposals look to fund a Public Bank with
State and city funds.
• By law, all taxes from North Dakota and the
Chickasaw Indian Nation in Oklahoma, go
first to these regions’ Public Banks.
• Philadelphia, PA & Santa Fe, NM are
considering Public Banks.
Existing Public Banks in Green:
North Dakota: Bank of North Dakota
Oklahoma: Chickasaw-owned Bank2 of Oklahoma City.
Is it a better local fiscal solution to reallocate some existing
funds into a Public Bank?
* http://www.nytimes.com/roomfordebate/2013/10/01/should-states-operate-public-banks/many-states-see-the-potential-of-public-banking
- citing the National Conference of State Legislatures (NCSL), last updated Jan 16, 2013

21.
Free up Funds
• Banks have unlimited low-interest credit
lines with the Fed
• States and municipal governments have
no credit line with the Fed
So they must create large “rainy day funds”—
public money that sits, earning little interest.

22.
Level the Playing Field
Federal law and the banking system give banks huge
advantages and place states at a financial disadvantage.
•Banks borrow at rates as low as 0.2% (overnight Fed
funds rate) to 1.27% (6-month CD)
•States borrow at much higher rates Our
state is paying too much for credit.
•Banks face new regulatory & compliance issues with
Dodd-Frank. A State Public Bank could help community
banks comply.

23.
Control Rising Credit Costs
• States are now hit with lower credit ratings,
making borrowing even more expensive
• A year ago, California was rated BBB, barely
higher than bankrupt Greece
What is OUR state’s credit rating?
New York’s rating is AA+ to AA– (2013)

24.
Urgent Need: Affordable Credit
What about municipal governments?
Don’t they borrow by issuing bonds?
Yes, at “market rates”— but these rates are being
driven up, increasing the cost of money.
The issue is not just available credit, but affordable
credit.

25.
What Can Be
Done?

26.
Today, state and local governments are:
• Investing their capital (pension funds), and
• Depositing their tax revenues (our money!)
on Wall Street
Translation: They are handing over their huge
credit generating power to the same big banks that
got us into this mess in the first place.
They are investing in Wall Street, not Main Street.
Does this make sense to you?

27.
Banking in the Public Interest
Deposits begin the creation of credit in a bank.
This credit is an asset of the bank.
If a state deposits funds in a Wall Street bank, it
is giving away its power to create credit.
This credit rightfully belongs to the public,
not to private banks.
Our state and cities should be managing that
credit in a public bank—serving the public
interest by investing in our own Main Street.

28.
Invest in Main Street Through a Public Bank
• Keeps our tax money working within the
state, city, or borough
• Keeps our credit from leaving the state, city,
or borough
• Strengthens our community banks
• Demonstrates that our elected officials are
working for us and not for Wall Street
• Helps our communities return to prosperity in
a nonpartisan way

29.
Recap: Solution Choices
• Raise taxes
• Cut services
• Sell assets
• Invest in our own citizens by creating
a public bank
There are no other choices.
Will we continue having our tax payments
sent to Wall Street banks?

30.
Next Steps
Refine and pass a resolution: “Return to
prosperity by forming a state-owned bank.”
Tell your state representative that keeping tax
revenues in our state is vital—an urgent need.
Find “natural allies” to speak with one voice
for public banking in the public interest.

31.
Natural Allies
• Community leaders whose budgets are being gutted by the state
• Enlightened legislators
• Enlightened Media & Reporters
• Public employees and unions faced with state and city budget cuts: teachers,
firefighters, construction workers, etc.
• Community bankers wanting to originate loans
• Unemployed and under-employed people
• Small business owners burdened by high credit card APRs to pay for inventory
• Activist groups like New York Public Banking Group; Democratic Alliance; Orange County
Peace and Justice; Orange County Public Banking Group; Unitarian Universalist Congregation
at Rock Tavern; Westchester People’s Action Coalition (WESPAC); The Pennsylvania Project

32.
Research, Approach, Petition (RAP)
 R - Join online groups:
https://groups.google.com/forum/#!forum/public-banking (219 members)
https://groups.google.com/forum/?hl=en#!forum/pbivolunteers (141 members)
https://www.facebook.com/groups/publicbanking/ (236 members)
 R - Download this slideshow: http://www.slideshare.net/ScottOnTheSpot/return-to-prosperity and
http://www.slideshare.net/ScottOnTheSpot/return-to-prosperity-6-slides-per-page
 R - Begin a study of benefits of a Public Bank in your community, city, state, compare funding
alternatives and current investments (will require experts!).
 A - Hold a Press Conference or public event: https://vimeo.com/68244964
 A - Cultivate the Press: “What North Dakota’s Public Bank Does for Small Businesses”
http://boss.blogs.nytimes.com/2014/03/13/what-north-dokotas-public-bank-does-for-small-businesses/
 P - Sign onto the petition to support a State Public Bank – Assembly bill A01696 / Senate bill S07416
- and gather more signatures: http://www.change.org/petitions/support-a-public-state-bank-for-new-york-
state
A thousand signatures hand-delivered in each district would make a big difference!
 P - Petition your Assembly Member, City Council member, State Senator, to support Public Banking. 10
co-sponsors already support the Assembly Sandy Galef bill, 2 co-sponsors for the Senate James Sanders
bill. Get them to sign the Resolution in favor of the bill in the Files section of this Facebook page:
https://www.facebook.com/groups/publicbanking/

33.
Approach Members of the Banking Committee to
Co-Sponsor the Galef Bill: A01696
New York State Assembly Banking Committee:
http://assembly.state.ny.us/comm/?sec=mem&id=4
Chair: Annette Robinson
Members: Peter Abbate; Jr. Joseph Borelli; Karim Camara; Brian
Curran; Patricia Fahy; Andrew Garbarino; Mark Gjonaj; Michael
Kearns; Micah Kellner; William Magee; Nicole Malliotakis; Michael
Miller Walter Mosley; N. Nick Perry; Andrew Raia; Robert Rodriguez;
Gabriela Rosa; Sean Ryan; William Scarborough; Luis Sepúlveda;
Aravella Simotas; Dan Stec; Claudia Tenney; Raymond Walter;
Harvey Weisenberg; David Weprin
All Co-Sponsors: O'Donnell; Steck; Rosenthal; Mosley; Skartados; Quart; Buchwald;
Gottfried; Jacobs; Mayer
Approached in Red Agreed to Co-Sponsor in Green