How Do I Sign North Dakota Banking Word

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we are very lucky to have with us live in the studios this morning Bob hasegawa Bob hasegawa is a longtime labour and social justice activist for 32 years he was a member of the Teamsters Union where he rose through the ranks to become the elected leader of the largest Teamsters trucking local workers union in the Pacific Northwest and was also a leader in the National Teamsters pro-union democracy reform movement and he is currently serving his third term in the Washington State Legislature representing district 11 Bob thank you very much for coming and spending time with us this morning thanks Mike is the pleasure to be here it's actually the fourth term I'm in there Oh fourth I'm sorry didn't get that resin people had thee that's good night they like yeah so and you've been there since 2005 yes okay so start out last year you co-sponsored a bill house bill 3162 to create state bank of Washington yes yeah so talk about a the need for Washington state bank and how that whole concept came about well the whole concept started with a conversation about revenue reform and we're trying to look at smart use of taxpayers money over the long term and you know there is one model that's been out there North Dakota of all places has their own publicly owned a banking institution called the bank of north dakota so working off of that model it's been working quite well for North Dakota over the years and the conversation turned you know because of the problems that we've been having with the banks since about 2008 2007 8 we are looking at new innovative ways to think outside the box and how are we going to build some capital reserve for the state you know we have a 2 billion dollars every year that we spend in debt service just to pay on loans bonds that we issue to keep capital construction moving in our state looking at the North Dakota model their own bank finances most of their capital projects and you know construction is one of the best ways to get money on the ground right now to keep the economy moving so they North Dakota does not have a debt service problem the bank finances all of their so that's like two billion dollars right there every year that is not spent on interest to Wall Street banks so our conversation turned to looking at a new way of maybe doing things and right now when the state collects all of our tax revenue it's primarily held at what we call a concentration account at the bank of america so essentially the Bank of America gets to use our taxpayers dollars and reap the profits from it and the thinking is why should we allow them to make money off of our money why don't we as a state make money off of our money and then we still control that money in the process and then we can redirect it back into our local economies for economic development purposes so it's just a smart way to do business and a smart way to use taxpayers money so that it's benefiting taxpayers here kind of seems like a almost a crime that it's going to bank of america actually with all the problems that they've had and yeah they're yeah yeah well it it's kind of a no-brainer deal really so what we're doing right now is we've had a couple of hearings on the bills during the last legislative session so there was a House bill 1320 and then there was a Senate companion bill I can't remember the number of that now 5623 I think it was so we had hearings good hearings on those bills last legislative session as a result of those hearings we have formed the house has formed a task force this interim to look at preparing a proposal for the 2012 legislature that hopefully will will be able to pass with the legislative session and hopefully the governor will sign so that task force had its first meeting last Monday if you're interested it was taped by TV w so it's on a TV w website but I'm very pleased with the caliber of the task force the quality of the people and the experiences of the members of the task force all of whom they're either legislators or they are people who come from the banking industry but who really are open-minded about seeing if we can really come up with a product that is doable through the legislature so we've we've had our first meeting it was basically an organizing meeting to lay the foundations and look at the type of work that we're going to be needing to do but it's it's a formidable task you know we're creating an institution a humongous institution and we have about five months to see where we can get with it so we're moving forward will be moving quickly on this stuff but all of our hearings will be open so if people want to come and observe and even comment on it will have common periods during each session so we can get feedback from how the public is looking at what we're trying to do too so we're moving forward with it it's very exciting and people can follow that through your website yes yes you can go to ledge gov I'm not acquit me right now but all of the it's a regular Committee of the House of Representatives so there's a way to find the website so how in addition to just saving us or using that money that's now currently going to bank of america that they're taking their cut out of and having that cut come back to the citizens here in Washington State House would a bank a state bank help let's say small businesses wells you know you talked to any small and that's this is one of the prime drivers of why we first started looking at this because when credit tightened know that if you talk to the banks they'll say there's lots of money out there to be lens and that they are in fact lending it but if you talk to any small business owner out there on this they'll say just the opposite and in fact there's been studies done there's actually been conflicting studies but primarily the ones that I've been relying on they'll interview small business owners in small business owners will say their number one issue as access to capital so I've had small business owners and farmers small farm owners come to my office literally on the verge of tears saying they're going to lose their farm just because they've been cut off from access to credit by their banks and nothing had changed within their credit rating or their credit history is just that the banks are saying the lending circumstances have tightened up so they don't want to make the same mistakes again which is understandable but that's a real drag on it our economy because 75% of the jobs new jobs that are created in our economy are created by small businesses and if they cannot get access to credit which every small business owner has or every business owner has credit needs because you know your your revenue and accounts receivables are always fluctuating and if the receipts do not match your outlays you need credit to whether through that until your receipts do come in well if you don't have that access you're done so one of the main things that the our own state bank can do is it following the model of North Dakota is they they partner with local commercial banks they don't the bank North Dakota does not compete with commercial bags it actually partners with them so it multiplies the available money that can be lent into the local economies and keeping small businesses and small farmers afloat so that's a key piece for what we're trying to create is that we do not want to compete against the banks what we want to do is partner with them to make sure the capital continues to flow into our community okay so and when you say banks you mean the big banks that are here in Washington or let's say smaller community banks and credit unions yeah my concern is mostly for community banks small community banks because they're the ones who are actually they know their communities that they work in that they operate in they know that needs in the credit histories of the people in the community that need the loans large banks obviously do are also in that same marketplace but they have sufficient resources if they had wanted to so by partnering with those banks whether their community banks or big national banks the end effect is that will be freeing up capital into the small businesses and small farmer communities so that they can survive one of the interesting things about North Dakota is North Dakota has a lot of firsts in the country I mentioned that the only state in the country that does have its own Bank but one of the things that North Dakota has is they call it the most decentralized banking system in the country in other words they have the most banks and bank branches per capita of any state in the country which means that the big banks haven't monopolized the marketplace that there is a lot of local community banks in North Dakota and so those are the types of banks that really understand the needs of local communities and and what we can really support here another thing that's interesting about North Dakota is that it has the lowest unemployment rate in the country not surprisingly because it does a great job in supporting local small businesses who am i mentioned provide most of the jobs in an economy to begin with North Dakota has another interesting first which is that it's the only state in the country that had a budget surplus last year so they had a budget surplus of 1.1 billion dollars a lot of people say that that's because their oil and gas revenues North Dakota is very rich in oil and gas and to a certain extent that is true that revenue does make help North Dakota significantly but when you add up all of the firsts that North Dakota does have in another thing that North Dakota has had is no banking failures you know state of Washington I think we're up to 15 banks that have failed since the credit crisis began and there's another 20 or so that are on the bubble and the reason for that is that the bank North Dakota acts as sort of a mini federal reserve for these bags and they it provides liquidity for these local community banks banks like any other business have cash flow issues too so with all of these firsts that North Dakota does have the one common factor amongst all of them is that they own their own Bank and if you look at any developing country around the world they all have publicly on institution banking institutions themselves so you look at Brazil China India Japan they all have their own state funded base the United States is one of the few countries that actually doesn't have its own public bank systems a lot of people think that the Federal Reserve is a publicly owned facility it's actually not it's the Federal Reserve is owned by the banks so they provide capital back and forth to the bay the Federal Reserve provides capital to banks but it's not publicly owned so their policies are our govern so to speak by a combination of political will from the US United States government but also by what the banks want so there's a distinct difference between that and a publicly owned institution so that's what we're trying to create is a little bit of independence from Wall Street for a state of Washington so have you spoken with representatives of some of the smaller community banks here in the state have about your idea yeah banks are sort of a cross the board understandably skeptical about this concept because their main concern is competition that they don't want the state-owned institution which would have enormous leverage to compete directly against them because the state institution wouldn't be paying taxes it doesn't pay taxes to itself that could give this institution so-called unfair advantage so that's understandable so that the main protection that we're trying to create some comfort level amongst the community bankers is that we do not want to compete you know we want to follow the Bank of North Dakota model as closely as possible which has proven to be a successful successful model they the Bank of North Dakota was created in 1919 in response to a credit crisis in North Dakota well actually was across the country back then they felt like their futures were out of their own control that Wall Street and actually banks in Minneapolis and Minnesota were controlling North Dakotans destiny they wanted to be able to control their own destiny and that was the impetus for creating their own bank and I have to imagine they there was a lot of resistance to that back when it happened oh yeah yeah there was a lot of resistance to it the banks obviously didn't like it they took it to the Supreme Court but the Supreme Court said if North Dakotans want to create a bank they should be allowed to create it so it has been it took some time because of that pushed back by the big credit institutions it took it took a while for the Bank of North Dakota to get rolling but it has played a significant role in the history of North Dakota for instance during the Great Depression the bank acted as sort of a heat sink for the credit crunch that the country was going through so for North Dakotans at the time you know the Dust Bowl yer and whatnot where there were no crops and people were just literally losing their farms the Bank of North Dakota which held the mortgages on a lot of those properties while the state of North Dakota actually declared a moratorium on foreclosures the state bank foreclosed on them on paper but actually let the people stay on the properties of work their farms until they were able the the economy turned around they were able to raise the crops and then the bank from North Dakota sold those properties back to the original owners for the amount that the banks had in them so it acted as that sort of heat sink to absorb the credit crunch issue until the farmers could get a float again so with the state bank also be working with the credit unions locally because I know that a lot of people who are moving their money into credit unions out of big banks into credit unions because that just seems like a safer thing at this point well the state bank wouldn't probably have any interaction with the credit unions at all following the North Dakota model the bank the state is a primary primary depositor within the bank so it would be the state's tax revenues would be the primary deposits for the bank now North Dakota does have a policy that the bank belongs to the people so if the people want to keep their money at the bank they should be entitled to but they don't market it to the general public whatsoever they just have a few hundred accounts personal accounts i think there be the Bank of North Dakota has one branch it's in Bismarck's if you want to do your business with the bank of north dakota you have to be willing to go to where their branches i actually visited their their bank it's a beautiful facilities been making money for the state they were able to build a brand new building recently it's a beautiful building there's a picture of it on the website I believe but they do not market to the general public so they don't have ATM scattered around the state they don't do credit cards necessarily for the general public any of those that you would consider typical banking services for the retail public its primary purpose is to be a depository for the state's tax revenues and to use that money wisely back to keep very local economies gone so how do you respond to people that say what we need is less government you know this state bank is just going to be another large entity that's going to be controlling our money in and sapping our resources away well I don't necessarily buy into that whole concept of less government to begin with I think you have to do you have to right-size government so it's not just strictly about shrinking or eliminating it's about doing what works best for to achieve our common goal and our common goal is we want jobs for everybody we want a social infrastructure including education and safety net services that is adequate for the people so and and by creating us our own state-owned banking institution it's it's such smart government in the sense that we're using taxpayers dollars for the best interest of the taxpayers and not to make profit for Wall Street that's just one thing the other thing that it does is it can consolidate a lot of government functions that we have right now that are are separately administered so we have the state actually oes have a lot of lending programs going on right now we've got the Public Works trust funded that helps finance local infrastructure development like building sewers and water systems that sort of thing we've got the Housing Trust Fund that puts money into developing affordable housing you know we have we've Health Sciences discovery fund we've got a lot of these little funds that are scattered all throughout the state department's if we put them all under one umbrella this consolidates government it makes for more efficiencies and better actual economies of scale for leveraging that money back into our local economies one of the things that a bank can do that these lending funds cannot is that it can leverage so what is a mystery to many people is this whole concept of fractional reserve lending so while we have lending funds they're just basically revolving lending fund so you put a loan out money comes back in that refunds the fund so that it can make more loans that's one way to do it but if you've got a billion dollars in a fun to lend out that's a billion dollars with a lending that you're capable of plus interest return the miracle of banking just by the word bank is that you can leverage the money so a billion dollars in actual fund you can leverage to actually 10 billion dollars worth or even greater depending on your risk tolerance but general banking principles are somewhere I think they're they're lining up around nine to ten times leverage a billion dollars worth of money set aside for capital construction for instance translates to ten billion dollars worth of work in the community so when they say states are not the federal government the state's can't print money actually we can on the books that's how banking works every bank does that so you can leverage that money that we appropriate for capital budget or for whatever leverage that back into the community for Economic Development and you can you can imagine the greater much greater effect that that will have and making sure that the economy keeps going yeah I know a bank of america likes to advertise on there under commercials that they're investing in local communities but it seems if you actually look at the number such anything about that yeah yeah I think that sort of bears that out you just talked to anybody on the street and that's where the real world is and if they can't get a loan you know there is there is money being lent but most of that money is being went to larger businesses and so you know a dollar wise yeah money is being lent but when they're going to large blue chips or whatever in the it it's not really doing what we would like to see which is to support local communities and small businesses and small farmers so what hurdles do you see ahead for this what is your plan going from here on out you said you just had a meeting here this last week yes our task force had its first meeting the major hurdle is to keep this as a nonpartisan issue I've been working really hard to make sure that this does not become bogged down in partisan politics you know North Dakota is a very conservative state its run I think both how both chambers of the legislature and the executive branch are all controlled by Republican Party but you talk to anybody from North Dakota and they are enormously proud they actually take pride in their public institutions especially the Bank of North Dakota so I'm trying to keep this as as nonpartisan that's probably the biggest hurdle is to try and keep people focused on what's in the best interests of the state of Washington and I get bogged down in partisan politics the other big hurdle we're going to have is just the time crunch you know trying to get a proposal prepared for the 2012 legislature you know to create a huge institution the size of a bank that can absorb well what our state revenues are three two billion dollars in a biennium so this is not a small feat so you know we'll we'll probably have to move into this thing incrementally and making those strategic decisions about where we want to start off and how we want to move forward those are going to be difficult decisions as well how much of what the bank of North Dakota as done can be easily transferred over to our state um easily as a relative tournament nothing in politics is easy but that being said you know I think we could do anything that the Bank of North Dakota can do you know obviously wash and state the economy is much different than the North Dakotan economy which is primarily based on extractive resources and farming Washington has a huge farming agricultural economic basis the largest industry in the state but we don't have those types of extractive resources like North Dakota does we do have a lot of other resources though that what that North Dakota does not have so I think that we can do anything that the Bank of North Dakota can do do we just need to make sure that whatever we do meets the needs of Washington State you know and we can't just like rubber stamp what bank of north dakota did and say that it will work here we need to meet be strategic about how we're going to implement this thing and how have big banks responded to your proposal like Bank of America well you know they obviously were knee-jerk opposed to it at the beginning but their primary concern is the competitive factor so as long as we can stay on track in this non-compete thing they surprisingly have moved off of their absolute resistance to wanting to work with us to see if there's a proposal that we can put forward in 2012 legislators so I'm very hopeful that we can get to a point where it won't meet that absolute brick wall resistance that would otherwise be there if we're developing a competitive institution all right what message would you like to leave with listeners regarding this issue the message if you're interested in this you can go to the website this is just one innovative concept in a larger revenue reform conversation I think the state needs to have you know our parents taught us how to build america back in the day the philosophy was those who get the most out of the system morally need to put the most back into the system so the top tax rate post-world war two was about ninety-one percent now we bought into this sort of trickle-down economics theory that we know it doesn't work just look at the economy around us you've got this whole divide between the haves and the have-nots that's growing working classes disappearing we need to go back to what works we know what works our parents taught us how to build america and that was with having adequate resources so that we can build something for our grandchildren and we've gotten away from that so this is part of that overall strategy of building resources for our grandchildren all right well with that we are unfortunately out of time I want to thank you very much for coming and spending time with us this morning Mike it's been my pleasure thank you for this