Recently Dylan Ratigan and the Huffington Post began a series entitled, “America For Sale: Is Goldman Sachs Buying Your City?”
In the first paragraph Dylan states, “In Chicago, it’s the sale of parking meters to the sovereign wealth fund of Abu Dhabi. In Indiana, it’s the sale of the northern toll road to a Spanish and Australian joint venture. In Wisconsin it’s public health and food programs, in California it’s libraries. It’s water treatment plants, schools, toll roads, airports, and power plants. It’s Amtrak. There are revolving doors of corrupt politicians, big banks, and ratings agencies. There are conflicts of interest. It’s bipartisan.”
Ratigan’s investigation shows that Goldman Sachs, Morgan Stanley and numerous other banksters are seeing “increased opportunity in ‘distressed assets’ (i.e. cities and states gone broke because of the financial crisis)” a crisis caused by Goldman Sachs, Morgan Stanley and the other banksters!
America and every other sovereign nation is on the distress sale auction block, with groups like the American Legislative Exchange Council (ALEC) being so brazen as to have on their webpage, “select your game square” ALEC will help you privatize one of seven sectors: government operations, education, transportation and infrastructure, public safety, environment, health, or telecommunications.
These public assets must not be sold. Instead, California should follow the eleven other states in beginning the process of creating a state bank. Californian’s assets should be put to work for the people of California – for the benefit of Californians. That’s why California NOW strongly supports AB 750 and urges the California Legislature to vote in favor of this vital piece of legislation.
As Ellen Hodgson Brown testified in support of AB 750, “State and local governments across the United States have huge amounts of capital that could potentially be leveraged into loans. They collectively own trillions of dollars’ worth of assets accruing by virtue of their citizens’ tax dollars. Besides tax revenues and real estate holdings, they maintain a variety of funds, including pension funds and “rainy day” funds. This money is currently invested at very modest interest rates, largely in Wall Street financial institutions. This capital could instead be leveraged into loans, if it were invested as equity in the state’s own bank. At an 8% capital requirement, a bank can leverage capital by a factor of 12.5, so long as it can attract sufficient deposits (collected or borrowed) to clear the outgoing checks.”
Ellen went on to point out that “Making credit available to county and city governments, school districts and other agencies currently facing heavy debt loads that result in interest and principal payments filling the coffers of out-of-state lenders cannot help but benefit the state by keeping such moneys in-state. One way to accomplish this is for the state to buy up the bonds and other debt instruments held by out-of-state parties and have the bond issuers pay the state instead. The state could then set whatever interest rate it deems appropriate, which in some cases may mean the difference between the agency being able to continue to support its debt or go into default. Regardless, the state and its citizens benefit by whatever interest is paid, as all of it would go to the state and not outside entities.
We can also look to the model in North Dakota where the state is buying up real estate loans from community banks. The collapse of the real estate market has had a huge negative effect on loan portfolio assets throughout the country, significantly impacting banks’ ability to lend. With the Bank of North Dakota buying up these loans from their community banks, those banks are in a better position to provide lending to small businesses and others than they could with those loans still on their books.”
Benefits deriving from the creation of a state bank are many, not the least of which is providing loan support to community banks that lend to California small businesses. According to the most recent Census Bureau Survey of Business Owners (2007), the number of women-owned businesses grew by 20.1 percent between 2002 and 2007, compared to 5.5 percent for men-owned firms. In 2007, the Census counted 7.8 million women-owned business, representing 28.7 percent of all nonfarm businesses in the US. See 2011 DOL Women’s Bureau Report In California, that translates to 1,351,087 women who own businesses, employing nearly 1.9 million people and generating $318.2 billion in sales. Having a source of lending that is dedicated to growing California small businesses including women owned small businesses would greatly enhance their growth and opportunities.
Private banks just won’t do it. In a June 30 article in the Wall Street Journal titled “Smaller Businesses Seeking Loans Still Come Up Empty,” Emily Maltby reported that business owners rank access to capital as the most important issue facing them today; and only 17% of smaller businesses said they were able to land needed bank financing. Why QE Failed: The Money All Went Offshore.
The five largest banks now hold 40 percent of all deposits and 48 percent of all bank assets. These banks—Bank of America, Wells Fargo, JPMorgan Chase, Citigroup, and PNC—currently control more deposits than the next largest 45 banks combined. They are big, they are powerful, and they have lost interest in local lending. In the past three years, the four largest banks have cut back on small business lending by a full 53 percent. The two banks that were the largest recipients of TARP funds, Bank of America and Citigroup, have cut back on local lending by 94 percent and 64 percent, respectively.
Why? In 2010, the six largest bank holding companies made a combined $75 billion; and of this, $56 billion was in trading revenues—income from speculating in derivatives, futures, commodities, and currencies. If the too-big-to-fail banks win on these bets, they win big and can pocket the proceeds. If they lose, the federal government can be relied on to bail them out. In those comfortable circumstances, why lend to risky local businesses that might go bankrupt, or to homeowners who might default?
The legislature and the Governor have an opportunity to begin to take control of California’s future for all the people of California. There are enormous problems facing this state and our country – creating a state bank is a corner stone in building a solid foundation for a bright future. Contact your legislator today and urge them to vote YES on AB 750.
Click here to watch a thoroughly entertaining but equally informative video on this subject.