Help Me With Sign North Dakota Banking Presentation

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hi you're listening to the YouTube edition of in context this is Ken McDermott Rowe and this is Gus Kant Aveiro today we're gonna be talking about public banking the idea is pretty simple States will use their own funds as the reserve to create a new bank and the bank that's owned by the state will make loans to promote infrastructure growth and business development within their own States and it's very important business to get into for the states because during this terrible economic recession we're in it's all about cut cut cut and we need to think of creatively about new ways to grow our economy and this seems to be a good way to do that how is this different than what the banks already do they're almost only one state in the country the Bank of North Dakota in which has been involved in state banking since 1919 that has such an institution and it's operated very successfully there as for almost a century and in North Dakota it's important to note that they have a very low unemployment rate and that they a budget which is one of the few state budgets which is in balance so it's worked very effectively there for a century and the tradition actually goes back to colonial times of state-owned banks back to Pennsylvania they had a state-owned bank and it was championed by Benjamin Franklin who attributed Pennsylvania's prosperity in the 18th century to the fact that Pennsylvania issued its own loans to create business development in that Commonwealth this is money that can be loaned to commercial banks that will then take that money and lend it at a reasonable interest rate to the citizens of the state to fund projects like infrastructure or it could be done for many different purposes and it can be done in many different ways the state banquet alone money directly for infrastructure projects or in the case of North Dakota often enters partnerships with other banks for large projects or for emergency loans or for some cases student loans it would all have behind it on the priorities of the state personally I think that the main use of such a Bank right now would be for infrastructure to promote the economic productivity of a given state and also for small business loans for businesses that are cut off from private lending right now right and this is something that is a nonpartisan issue this isn't something that we're advocating to benefit the banker because this money would produce future revenues that would then be paid back to the state I have very good point guys these bank loans made by the State Bank will produce revenues from interest collected even though the interest will be at a pretty reasonable rate compared to the private sector right and though isn't that income from interest will go right into the state treasury so what is the relationship between the commercial banks that citizens can go up and interact with and get loans from put their deposits into with a state-run bank well the case of North Dakota they didn't really go in big-time into the savings accounts the checking accounts they see that themselves as a catalyst for the private sector acting in partnership with other banks to make loans state bank could have its own savings accounts and checking accounts but it seemed to me that's Annie that's already been met by the commercial banks where we really have the need for state finance banks is for projects that are so long-term that the private sector wouldn't find a sufficient short-term return for them to get into it how does it actually work the states at any given time have substantial amounts of money what they call a rainy day fund in the case of a state like California that can be as much as seventy billion dollars it's a significant amount of money huge amount of money but that state agencies need for their operating functions that this Treasury Department may have from tax revenues that are waiting to be dispersed so these funds are right now they're just sitting there maybe the banks getting a one or two percent return on it and putting it into investments that in no way may benefit the state they may be used for speculation and derivatives or any other purpose that's not contributing the state's economy so the idea is we use this banker the state would use these these these funds that are available as a reserve now the reserve doesn't actually get lent out our reserve in a bank where there'll be the state-owned bank or the commercial bank is simply used as a backstop for the new loans that are created by the state bank to stimulate growth and that can be done under the fractional reserve system many times greater than the actual amount of reserves so you could actually make loans that are multiples of the amount of reserves you have but the difference would be where commercial banks and say like the Federal Reserve which is privately run they use fractional reserve banking to benefit themselves and their shareholders we're a state-run bank would use fractional-reserve to actually inject liquidity and capital into the state economy that's right it would be for the benefit of the state economy not not the benefit of investments or speculation elsewhere additionally the state-owned bank would obviously not be paying huge bonuses to high-flying risk-taking executives the guys would be paid who worked there would be paid reasonable salaries and they wouldn't be charging exorbitant interest rates because the state could obviously set the interest rate that which it shows to lend money beside North Dakota which already has this bank functioning aren't there other states around the country that currently have bills appending to create a state-run bank that's right there are seven states that have now are considering bills to either create a state bank or to study the feasibility of creating a state bank including Michigan Massachusetts Illinois Virginia and Oregon so it's a substantial movement and it behind it now we're helping to foster it is an organization called the public banking Institute which is chaired by Ellen brown who wrote a book called web of debt and she's one of the leading money experts in America and she's decided to put her knowledge of money to work to create this new state banking movement so to summarize a commercial bank will lend money out at a high interest rate and earn a profit on that which benefits them as a corporation but aka state-run bank would be taking the interest rate which is much more moderate and then putting that money back into the state coffers which they can create more public service projects or reduce taxes or do whatever else that would benefit the citizens of that state exactly Gutzon it's really a no-brainer there's no reason not to do it that money is sitting there in the state government's earning minimal interest in it they could you be leveraged as a reserve for a new bank to benefit the state and its citizens not only that but the states are investing their money into banks in other states or in other other locales that is not benefiting the state in any way and you shade it through the biggest form of investments now are derivatives and they're doing nothing for your local local state development one of the problems that sit in the economy right now is that we've seen a lot of the states and cities invest their money into funds that have been completely pilfered by by the the economic crisis right now causing all the layoffs and budget cuts and as a state agency this state bank will be subject to the scrutiny of the elected representatives so there's going to be accountability do you think that the opponents of the public banking might say that this is going to put the government a position where they can choose the winners and losers in the economy I think there has to be a concern that you want the bank to be run in a very businesslike basis and I think that this banking community can be brought to understand that this will benefit them too if a state economy is increased in prosperity because of investment in infrastructure that's going to be boosted businesses of all kind thanks very much for listening to this YouTube edition of in context this is Ken McDermott Rowe and Gus can't Aveiro you can check out our website in context report.com on the web and then make your comments on our blog and you can tune in to us on w pkn 89.5 FM in Bridgeport Connecticut our schedules listed on the website and we're also streamed live at W pkn org thanks for listen