On Nov 30, 2016 The Stand, the digital voice of the Washington State Labor Council, posted an open letter to the Seattle City Council advocating a municipal public bank as a means of financing twice as much affordable housing than could be done by the method proposed by Kshama Savant and other progressive Council members i.e. selling bonds which is borrowing money from private banks. http://www.thestand.org/2016/11/address-housing-other-city-priorities-by-creating-seattle-public-bank/ The proposal to charter a city public bank was also prompted by the concern that the City of Seattle move its money out of Wells Fargo because of that banks activity of bilking its customers, firing thousands of low-level employees, and investing in the Dakota Access pipeline.
On January 1, 2017 The Seattle Times printed an op-ed entitled “The Peril of Public Banking” written by Michael Waite, formerly a Republican candidate for State Treasurer of Washington State. http://www.seattletimes.com/opinion/the-peril-of-public-banks/ The authors of the open letter were surprised by the Op-Ed because it had seemed that the open letter had been ignored. No member of the Seattle City Council bothered to reply although each was sent a copy.
Waite does not seem to understand exactly what the Seattle Public Banking Coalition http://www.seattlepublicbanking.org/ is proposing, or for that matter what Senator Bob Hasegawa has been proposing in Olympia. It is simple: a banker’s bank modeled on the successful, popular, and honest Bank of North Dakota, which partners with the community banks and credit unions of North Dakota.
Dennis Ortblad, a member of the Seattle Public Banking Coalition, has written an op-ed in reply to Michael Waite’s piece. Here is a link to Dennis' article in the Seattle Times: http://www.seattletimes.com/opinion/the-homegrown-promise-of-a-seattle-public-bank/
THE PROMISE OF PUBLIC BANKS
By Dennis J Ortblad
Special to the Times
Public banks have an excellent track record in helping states and cities finance infrastructure, among other public services. Your January 1st op-ed overlooks this fact, failing to mention that North Dakota has used a state-owned bank for nearly one hundred years to offer low cost lending to school districts, public utilities, and small business. It has a sterling credit record and earned for the state $130 million in 2015 alone, with total assets of $7.4 billion (its 12th consecutive year of record profits for the people of the state.)
The January 1st op-ed raises three “red herrings”, citing public banking practices that our Seattle Public Banking Coalition would never endorse:
No “Conflict of Interest:” We propose to the City Council using North Dakota’s model of lending. Instead of its public bank being “in the competitive mix with private banks,” the bank actually lends in partnership with local banks and credit unions, jointly vetting each loan with them on a commercial basis. As in North Dakota, a public bank here could help local banks improve the availability of credit for business and student loans by buying down the interest rates these banks must otherwise apply. This model of backing up local banks helps them thrive amid stiff competition with large out-of-state banks.
No “Administrative Mistakes:” We propose an independent bank board that includes business and banking professionals, who tightly govern a public bank’s practices. Cooperative reliance on the lending expertise of our local banks eliminates the need for a public bank to hire “hundreds, possibly thousands, of bureaucrats” as the op-ed alleges.
No “Bad Debts:” With its independent board, a public bank could never “become a politically focused weapon” that forgives bad debts for insiders. In fact, we propose a public bank in Washington that lends primarily to public institutions (e.g., school districts, affordable housing programs, public utilities) in order to reduce the state’s or a municipality’s reliance on the expensive bonds and fees in Wall Street markets. Washington’s public infrastructure bonds enjoy an excellent record, The state’s Public Works Assistance Account has never had a default on repayment of loans in its nearly 30 year history of supporting necessary water, sewer and roads projects, making this lending nearly risk free for a public bank. Once it has grown its assets like North Dakota’s, the bank can support broader lending for home mortgages, small business, and student loans. This cooperative, private lending through its local financial partners significantly reduces the risk of accumulating bad debt, certainly less so than has proven to be the case with Wall Street banks.
New Thinking: It’s time for new thinking about how to support local development by keeping our tax money at work at home with a public bank. In my career as a diplomat, I saw how public banks played a major role in boosting economic growth and services in Germany, Japan, and Switzerland. A public bank in Washington is a way to mobilize our local assets to strengthen public services and individual opportunity, instead of serving the interests of large banks and campaign donors thousands of miles away. It’s a “no-brainer” to borrow from ourselves and pay ourselves back.
Indeed, our one point of agreement with the op-ed is that the $1 billion in Washington’s interest payments this year “would be enough to pay for more than 10,500 new teachers, or give a 25 percent pay increase to every current teacher.” Recapturing some of this $1 billion and cycling it back into our local economy for education, infrastructure and housing–rather than sending it all to Wall Street–is the merit of a public bank.
Dennis J Ortblad has worked on financial issues for the U.S. State Department overseas in embassies and consulates in Germany, Japan, Switzerland and Manila. He is a member of the Seattle Public Banking Coalition. As a Foreign Service retiree, he resides in Seattle with his family.
Also, looking forward to the next session of the Washington State Legislature, Bob Hasegawa will drop a bill for a public bank with a new Section 1 Findings and Intent.
As part of the effort to organize and educate Bernie supporters who are becoming active in the Democratic Party, Bob will host a meeting for Bernie delegates to the DNC on January 27 in the Olympia Red Lion. (Washington State Democrats are having their reorganization meetings that weekend.) Bob and Seattle Public Banking Coalition will then host a state bank hospitality room, from 8:30 pm to 11pm, also at the Olympia Red Lion, January 27.
Cindy and I recently watched an almost 2 hour 2010 video made by Bill Sill and found it to be of value. It can be seen on YouTube https://www.youtube.com/watch?v=Sboh-_w43W8
Really the issue is simple: who controls our money? The people or the big, private interests. A public bank can start to make our money a public good instead of what it is now, a way for a few wealthy people to profit.
by John M. Repp