US State Legislatures: Implementing Monetary Reform

Editor's note: If US state legislatures do not act according to state chattered bank directives then "Americans are toast." Monetary reform including community banks protected by county sheriffs, state bullion exchanges and local currencies are the only options we have. State banks can create liquidity under highly controlled circumstances. Unless state chartered banks begin aggressively stepping forward to assist the American people and state legislatures they are also going to lose their banks. Once the central banks (see the ECB wants to become the only bank in town) remove all power from state legislatures and state chartered banks that is the end of the financial road for us.

State Legislatures: Please Start Developing State Bullion Depositories

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Source: Global Research 

The Public Bank That Wasn't: New Jersey's Excursion Into Public Banking

By Ellen Brown | Global Research | March 10, 2024

In 2017, Phil Murphy, a former Goldman Sachs executive, made the establishment of a public, state-owned bank a centerpiece issue during his run for New Jersey governor. He regularly championed public banking in speeches, town halls and campaign commercials. He won the race, and the nation's second state-owned bank following the stellar model of the Bank of North Dakota (BND) appeared to be in view.

Due to the priority of other economic-policy goals, the initiative was largely kept on the back burner until November 2019. Then, in an article titled "Murphy Takes First Key Step Toward Establishing a Public Bank," the New Jersey Spotlight announced:

Gov. Phil Murphy is planning to sign an executive order Wednesday [Nov. 13] that will create a 14-member "implementation board" to advance his goal of establishing a public bank in New Jersey.

The basic premise of such an institution is to hold the millions of dollars in taxpayer deposits that are normally kept in commercial banks and leverage them instead to serve some sort of public purpose. … [Emphasis added.]

North Dakota currently is the only state that operates a public bank wholly backed by the deposit of government funds. [Emphasis added.] Founded a century ago to help insulate farmers from predatory out-of-state lenders, the Bank of North Dakota offers residents, businesses and students low-cost services like checking accounts and loans. It has also been used to advance projects that boost infrastructure and economic development, and has even produced revenue for the state budget's general fund, according to the bank's promotional materials, thanks to lending operations that regularly turn a profit.

Gov. Murphy signed Executive Order 91 on Nov. 13, 2019, and the Implementation Board worked diligently for the next 3-1/2 years to advance its goals. In June of 2023, the governor signed bill S3977/A5670 into law, creating the New Jersey Social Impact Investment Fund (SIIF) along with a $20 million appropriation for seed funding. The State engaged Next Street, a mission-driven advisory firm, to create a report with guidance and input from the Public Bank Implementation Board, and on Feb. 2, 2024, Next Street submitted its "Recommendations for Implementing a Public Bank in New Jersey" to the governor.

The report did a commendable job of identifying the extensive needs for increased financing by a wide variety of interests in New Jersey, including support for small business, affordable housing, home ownership, student loans, education, better infrastructure, and many others. Also commendable were its recommendation that the Community Advisory Board be constituted of local stakeholders that could most benefit from public bank funding, and its assurance of accountability to the State and the public through transparency, detailed annual public disclosure, and an independent annual audit.

When Is a Bank Not a Bank?

Public banking advocates have serious concerns, however, about other aspects of the report. Most concerning is its apparent attempt to redefine a "public bank." The report recommends creation of a public bank as a successor to the SIIF but asserts that the public bank should not be a depository institution. This recommendation is repeated throughout the report.

Many authorities confirm that a financial institution is not a "bank" unless it takes deposits. See e.g. Investopedia:

"A bank is a financial institution licensed to receive deposits and make loans."

See also SoFi's "Guide to Depository Institutions," stating

"There is no difference between a bank and a depository. A bank is a type of depository institution."

And see Wikipedia:

"A bank is a financial institution that accepts deposits … and creates a demand deposit while simultaneously making loans."

The Wikipedia definition highlights the stellar advantage of a "bank" over a "revolving fund" of the sort the Next Street report recommends: banks actually create money as deposits when they make loans. It is this authority that gives bankers their enormous power in the economy and in government, and it is a power backed by the credit of the people. It should therefore belong to the people; and as Governor Murphy recognized in 2017, it can be reclaimed by the people through their own publicly-owned banks.

The nation's sole state-owned public bank, the Bank of North Dakota, takes deposits. Taking deposits is what makes it a "bank." Being owned by the state is what makes it a "public bank." Because it is a bank, BND can create new money in the amount of the loan when it extends credit; and it is permitted to make a profit through its loans. It can convert its profits or a portion of them quickly to new capital, which can generate new loans up to 10 times the bank's capital base.

A New Jersey public bank on this model would be able to grow quickly, eventually reaching the size needed to fully fund the state's large unmet needs. See for reference "Why a Sovereign State Bank Is Good for Tennessee" by Prof. Richard Werner, who proposes initial capitalization of $500 million for a Tennessee state-owned bank. A $20 million revolving fund would be barely sufficient to cover New Jersey's startup costs. The Next Street proposal is to leverage this fund with private capital, but that approach has repeatedly been shown to be inadequate to fund infrastructure and other major public projects. In many states it is unlawful for a lending institution that does not take deposits to call itself a "bank." Public banking advocates contend that such misuse of the term "bank" confuses public officials and the public and hinders the public banking movement. The Public Banking Institute definition of "public banks" is "banks with a depository bank charter (or equivalent direct license) that the public owns through their representative government and that work to benefit local communities." The PBI website also features an infographic distinguishing various types of financial institutions, titled "U.S. Public Banks, Banks, and NonBanks At-A-Glance: How Public Banks Excel."

A Bank Is Not a Charitable Revolving Fund

Among other concerns are the Next Street presumption that the New Jersey public bank would be making risky, unprofitable loans (e.g. loans to uncreditworthy businesses otherwise unable to get affordable credit), and the recommendation that the bank could be majority privately owned and operated. The BND is more profitable than some of the largest Wall Street banks; and to be a public bank, the institution must by definition be either majority or 100% publicly owned and operated.

On the BND model, the New Jersey bank would be run by professional bankers who prioritize safe lending. BND has been safely operated for 105 years, despite a majority of its board occasionally shifting political parties. Experienced bankers make its loans free from board or political influence and from conflicts of interest. BND's principal depositor, the state of North Dakota, by law must keep its funds in the bank, thus protecting BND from a run on its deposits. The Standard & Poor's credit rating for the BND is A+/stable. The S&P report states, "BND has one of the highest risk-adjusted capital (RAC) ratios for rated U.S. banks."

Please go to Global Research to continue reading.

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More:

Community Banks

International Public Notice: Regarding Money and Charges

International Public Notice: Banks Can Steal Your "Money"

Step out of the central bank and big tech trance right now


Related:

Monetary Reform

Base for developing a local currency:

Real Currencies

The Frank-Dodd Act was designed to kill off community banks:

Regulation Is Killing Community Banks – Public Banks Can Revive Them


Building wealth:

Building Wealth With Richard Werner

Not the big private banks like this article discusses. But local community banks.

FDIC Data Contradicts Fed Chair Powell: Shows Real Estate Problems Have Skyrocketed at Largest U.S. Banks, Not the Smaller Regionals

Just for kicks: The US Government is "printing" - $1 trillion every 90 days. This is what inflation looks like. U.S currency is produced by the Bureau of Engraving and Printing and U.S. coins are produced by the U.S. Mint. Both organizations are bureaus of the U.S. Department of the Treasury.