By Earl Staelin| Dragan Mejic| Juan Marcano -May 22, 2020
The state of Colorado and nation are reeling badly, with no real solutions in sight. The state budget faces a $3 billion shortfall. The state’s emergency funds, limited by TABOR, aren’t nearly enough to keep the state running. That is our harsh reality.
Our ability to control COVID-19 is limited. We can do far more to stop the economic collapse, which otherwise could last for decades. The solution is incredibly simple: create a state of Colorado Public Bank and borrow from the Federal Reserve at its new discount window interest rate of 0.25%. This could help generate many low-interest loans at 1-3% for immediate economic relief. After three months, the Fed loans can be rolled over daily. The Fed also recently eliminated reserve requirements and relaxed capital requirements. (See article by Ellen Brown, author of The Public Bank Solution, showing how the new Fed rules empower banks in this crisis.) Banks actually create new money out of nothing when they make loans. Why give that enormous power and the income away to major banks to invest elsewhere for their shareholders’ benefit rather keep the loans and income here?
Colorado could move its deposits and investments from Wall Street banks to its own bank. It could convert the Colorado Housing and Finance Authority’s and its other lending funds to bank capital. Or it could use revenue bonds, investment pools, or say 3-5% of PERA investments for capital and provide PERA a higher and safer return than its hedge fund investments. The bank could lend 10 times its capital or more.
Public banks provide major new income without raising taxes and could sometimes enable tax reductions. Colorado’s Office of Legislative Legal Services has issued a legal opinion that a public bank as a self-sustaining “TABOR enterprise” would probably not violate Colorado’s constitution.
A former state banking director says a public bank could be started in a month. The public bank could make loans in partnership with local community banks to build affordable housing, prevent foreclosures and takeover of property by real estate investors who invariably raise the rent. It could help struggling businesses, expand COVID-19-related health services, finance infrastructure, and refinance student loans. These actions would save tens of millions on the cost of interest annually which averages nearly half the cost of a loan and up to 77% of the cost of affordable housing.
The public bank would be managed by professional bankers, would be transparent and accountable, and carefully operated to prevent conflicts of interest and political or corporate interference. Public banks have very low overhead — no ads, branches or ATMs, no humongous salaries, no dividends or speculative loans. They can be very profitable. The Bank of North Dakota (BND) has averaged 17% profit per year over the last 16 years, much higher than Wall Street.
Last October, California enacted a bill authorizing cities and counties to obtain public bank charters, and in November, New Jersey’s Gov. Murphy issued an executive order establishing a board to implement a public bank. Other states are moving forward.
In 2019, the Bank of North Dakota had $4.5 billion in outstanding loans in a state with 762,062 people. In the 2008 crash, BND increased lending slightly to offset the decline, making North Dakota the only state to avoid recession and instead achieve record profit each year. Some argue it was North Dakota’s oil, but Montana and Alaska had as much oil and still had budget deficits and high unemployment. North Dakota’s fracking income did not kick in until 2010.
Alberta, Canada, has operated the largest public bank in North America — ATB Financial, since 1938. With a population of 4.4 million, its bank has $47 billion in loans outstanding, a bulwark for its economy.
A comparable bank for Colorado’s 5.76 million population could generate $61 billion in loans, enough to reverse the recession. The multiplier effect augments the benefits. In this crisis, our governor has issued bold executive orders demonstrating his leadership. This is an opportune time to again demonstrate outstanding leadership. Colorado could recover fully in 12-24 months and be a model for the country. Gov. Polis and legislative leaders, we need a state public bank today.
Correction: An earlier version of this post said that a Colorado public bank could refinance the state’s bonds. Colorado’s constitution prohibits the state from contracting debt.
Please Take Action NOW to Make Public Banking a Reality in Colorado.
As an economic crisis unfolds along with our current respiratory health crisis, we look to you, our elected leaders, to create bold, visionary solutions and to chart new paths forward that are innovative and solutions-focused. Establishing public banks now would help Colorado handle its current financial crisis, providing immediate and permanent benefits. Public banks would create money in the form of bank credit and offer the ability to lend at low interest rates instead of focusing on maximizing profit as private banks do. With no shareholders to pay, it can pass the low rates on to borrowers such as public agencies, local businesses, residents, and students.
The public state bank of North Dakota has helped its state not only weather economic disasters but prosper, a record similar to the public banks in one of the world’s strongest economies, Germany.
During this precarious economic time, a public bank will save us money in fees to the Wall St banks and in interest on infrastructure projects which often doubles the cost of those projects
A public bank will also generate new, non-tax revenues, outside of the constraints of TABOR.
A state public bank will support local economies, help create jobs through small business loans, support local programs and projects, and not deplete our financial resources while fattening the pockets of Wall St bank executives, lobbyists and investors. Furthermore, a state public bank would give us control over our own money, allowing us to accelerate sustainable energy programs.
Public banks will allow Colorado cities and counties to create sound investments that will save money and allow them to create lower interest loans to service local needs. It holds the potential to improve many areas that directly impact our communities including: affordable housing, small business development, infrastructure, renewable energy and serving the needs of the unbanked and underbanked populations. Public banks could also partner with community banks and credit unions to strengthen local lending.
There is legal precedent indicating that public banks are already legal in Colorado. Governor Polis does have the power to make this happen via Executive Order. Please act now.
Please enact bold solutions including an Executive Order to create a state public bank along with enabling legislation to allow cities and counties to create public banks as well as bank with credit unions as an alternative option.
Sample Outreach Email
Subject: Take Action NOW to Make Public Banking a Reality in Colorado! Send a Letter to Your Electeds Today.
As an economic crisis unfolds along with our current respiratory health crisis, we know we need to chart a different path forward. Establishing public banks now would help Colorado handle its current financial crisis, providing immediate and major permanent benefits. Public banks would also provide a much needed alternative to financing the climate crisis as is being done by the major Wall Street banks.
Public banks can also create money in the form of bank credit and lend at low interest rates instead of focusing on maximizing profit as a private bank would. With no shareholders to pay, it can pass the low rates on to borrowers such as public agencies, local businesses, residents, and students.
Here’s how you can take action now to urge our leaders to implement public banks in Colorado to meet our current crisis:
- Send a letter today urging your elected officials, Governor Polis and Treasurer Young to enact public banking solutions in Colorado as soon as possible.
- Learn more about public banking and join the Colorado Public Banking Coalition here.
- Sign on to this letter of support for public banking here.
The time is now!
Here’s what you need to know:
- The public state bank of North Dakota (one hundred years old and thriving) has helped its state not only weather economic disasters but prosper, a record similar to the public banks in one of the world’s strongest economies, Germany.
- During this precarious economic time, a public bank will save us money in fees to the Wall St banks and in interest on infrastructure projects which often doubles the cost of those projects
- A public bank will also generate new, non-tax revenues, outside of the constraints of TABOR.
- A state public bank will support local economies, help create jobs through small business loans, support local programs and projects, and not deplete our financial resources while fattening the pockets of Wall St bank executives, lobbyists and investors.
- A state public bank would give us control over our own money, allowing us to accelerate sustainable energy programs.
Governor Polis DOES have the power to make this happen. We need to let him, along with our elected leaders, know we want innovative options and urge swift action.
Please forward this email to your family and friends and urge them to add their voices. Also, please forward it to the leadership of every organization to which you belong asking that it be disseminated to their members. We need to generate a tsunami of support so that Governor Polis, Treasurer Young and every legislator realize there is vast, grassroots support for public banking to strengthen Colorado’s economyNOW!